Press Information Bureau

Government of India

Ministry of Finance

30-December-2011 16:24 IST

India’s External debt Stood at US$ 326.6 billion at End-September 2011; an increase of 6.6 per cent over the Level of US$ 306.4 billion at End-March 2011

           At end-September 2011, India’s external debt stock was US$ 326.6 billion reflecting an increase of 6.6 per cent over the level of US$ 306.4 billion at end-March 2011. The rise in external debt is largely attributed to increase in external commercial borrowings, export credits and short term debt.

           Short-term debt accounted for 21.9 per cent of India’s external debt at end-September 2011 while the rest (78.1 per cent) was long-term. Component-wise, the share of external commercial borrowings stood highest at 30.3 per cent in total external debt followed by NRI deposits (16.0 per cent) and multilateral debt (15.0 per cent).

           Between end-March 2006 and end-March 2011, commercial borrowings have registered a compound annual growth rate of 27.4 per cent. The increase in external commercial borrowings reflects some concern, given that the depreciation of the Rupee leads to higher debt service burden in Rupee terms that could impact profitability and the balance sheets of corporate borrowers.

            The shares of Government (Sovereign) and non-Government in total external debt were 24.3 per cent and 75.7 per cent, respectively, at end-September 2011.

           The share of debt denominated in US Dollar was the highest in India’s external debt stock at 55.8 per cent at end-September 2011, followed by the Indian Rupee (18.2 per cent) and the Japanese Yen (12.1 per cent).

           India’s foreign exchange reserves provided a cover of 95.4 per cent to the total external debt stock at end-September 2011 vis-à-vis 99.5 per cent at end-March 2011. The ratio of short-term external debt to foreign exchange reserves stood at 22.9 per cent at end-September 2011, as compared to 21.3 per cent at end-March 2011.Other indicators of India’s external debt remain within manageable limits.

           The ratio of concessional debt to total external debt declined to 14.7 per cent at end-September 2011 from 15.5 per cent at end-March 2011.

           The detailed Report on India’s external debt as at end-September 2011 is available on the website of Ministry of Finance – www.finmin.nic.in.

DSM/GN

External debt growth driven by commercial borrowings raises currency risk and increases short-term debt exposure relative to reserves. India's external debt rose to US$ 326.6 billion at end-September 2011, driven mainly by increases in external commercial borrowings, export credits and short-term debt. Short-term debt accounted for 21.9% of total external debt while external commercial borrowings were the largest component, followed by NRI deposits and multilateral debt. The currency mix was dominated by the US dollar, and the rise in commercial borrowings heightens currency risk because rupee depreciation raises rupee-denominated debt service for corporate borrowers. Foreign exchange reserves provided substantial but slightly reduced coverage of total external debt, and the share of concessional debt declined.