Press Information Bureau

Government of India

Ministry of Finance

08-May-2012 18:52 IST

India’s External Debt Stood at Us$334.9 Billion at End-December 2011

The current account deficit (CAD) is financed by capital account surplus and drawdown of foreign exchange reserves in case CAD exceeds capital account balance. Capital flows include both equity and debt. Equity comprises foreign direct investment and portfolio investment while debt flows include external commercial borrowing, external assistance, banking capital and short-term trade credit etc. In recent times, CAD was financed by the capital account surplus except in 2011-12 ( upto December 2011), when higher CAD led by trade deficit and moderation in capital inflows, resulted in drawdown in foreign exchange reserves.

India’s total external debt stock at end-December 2011 was US$ 334.9 billion, reflecting an increase of US$ 11.0 billion (3.4 per cent) over end-September 2011 level of US$ 323.9 billion. The rise in debt stock was mainly due to higher external commercial borrowings and short-term debt.

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in Rajya Sabha today.

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DSM/Hb

Current account deficit financing: capital flows and reserve drawdowns shape external debt and financing composition. The current account deficit is financed by capital account surplus and, if that is insufficient, by drawdown of foreign exchange reserves; capital flows include equity (FDI and portfolio) and debt (external commercial borrowings, external assistance, banking capital and short term trade credit). Recent increases in external debt were mainly due to higher external commercial borrowings and short term debt, reflecting moderation in capital inflows and a wider trade deficit.