India’s external debt rose by nearly 13 per cent to $390 billion in 2012-13, mainly due to rise in short-term trade credit and external commercial borrowings (ECBs) in the back of high current account deficit, the Reserve Bank said on Thursday.

“The high current account deficit witnessed during 2012-13 and it’s financing increasingly through debt flows particularly by trade credit resulted in significant rise in India’s external debt during 2012-13,” RBI said in a release.

The increase in the debt during 2012-13 was primarily on account of rise in short-term trade credit. There has been sizeable rise in ECBs and rupee denominated NRI deposits as well, it said.

“However, magnitude of increase in external debt was offset to some extent due to valuation change (gain) resulting from appreciation of US dollar against Indian rupee and other international currencies,” the RBI added.

The total external debt was about $345.5 billion at end-March 2012.

RBI further said that excluding the valuation change due to the movement of U.S. dollar against major international currencies and rupee, the external debt as at end-March 2013 would have increased by $55.8 billion. However, the actual increase was lower at $44.6 billion.

As per the data, share of ECBs ($120.9 billion) continued to be highest at 31 per cent of the total debt, followed by short term debt (24.8 per cent) and NRI deposits (18.2 per cent).

Trade credit components of external debt (both long-term and short-term) showed an increase of $20.3 billion during the period.

The NRI deposits increased by $12.2 billion to $70.8 billion as at end-March 2013 primarily on account of increase in rupee denominated NRI deposits reflecting the impact of deregulation of interest rates on these deposits in December 2011, RBI added.

As far as the currency composition of the debt is concerned, the U.S. dollar denominated debt continued to be the largest component with a share of 57.2 per cent, followed by rupee (24 per cent), SDR (7.5 per cent), Japanese yen (6.3 per cent) and euro (3.5 per cent).

The ratio of foreign exchange reserves to external debt as at end-March 2013 at 74.9 per cent was lower than the level of end-March 2012 (85.2 per cent).

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