As per the standard practice, India's external debt statistics for the quarters ending March and June are released by the Reserve Bank of India and those for the quarters ending September and December by the Ministry of Finance, Government of India. The external debt data are released with a lag of one quarter. The external debt data, as compiled in the standard format, as at end-March 2012 in Rupees and US dollar terms and revised data for the earlier quarters are set out in Statements 1 and 2. The major developments relating to India’s external debt as at end-March 2012 are presented in the following paragraphs.

Highlights

With a widening current account deficit and continued uncertainty in global economic scenario and prospects for equity flows, dependence on debt flows rose considerably during 2011-12. As a result, external debt stock increased during 2011-12, and key vulnerability indicators like debt-GDP ratio and debt service ratio witnessed deterioration over the year.

1. India’s external debt, as at end-March 2012, was placed at US $ 345.8 billion (20.0 per cent of GDP) recording an increase of US $ 39.9 billion or 13.0 per cent over the end-March 2011 level on account of significant increase in commercial borrowings, short-term trade credits, and rupee denominated Non-resident Indian deposits.

2. Excluding the valuation effects due to appreciation of US dollar primarily against Indian Rupee, the stock of external debt has increased by US$ 51.8 billion over the stock as at end-March 2011.

3. The share of commercial borrowings stood highest at 30.2 per cent as at end-March 2012 followed by short-term debt (22.6 per cent), NRI deposits (16.9 per cent) and multilateral debt (14.6 per cent).

4. The short-term debt increased by US$ 13.2 billion on account of rise in short-term trade credits, FII investment in T-bills and commercial banks borrowings.

5. The debt service ratio increased to 5.6 per cent during 2011-12 as compared to 4.2 per cent during 2010-11.

6. Based on residual maturity, short-term debt accounted for 42.7 per cent of the total external debt as at end-March 2012. Whereas the share of short-term debt, by original maturity, was 22.6 per cent of the total external debt stock.

7. The ratio of short-term debt (residual maturity) to foreign exchange reserves at 50.1 per cent as at end- March 2012 was higher compared to 42.3 per cent as at end-March 2011.

8. The US dollar denominated debt accounted for 55.0 per cent of the total external debt stock as at end-March 2012 followed by Indian rupee (21.4 per cent) and Japanese Yen (9.1 per cent).

9. India’s foreign exchange reserves provided a cover of 85.1 per cent to the external debt stock at the end of March 2012 as compared with 99.6 per cent as at end-March 2011.

1. India’s External Debt as at end-March 2012

1. India’s external debt, as at end-March 2012, was placed at US$ 345.8 billion (20.0 per cent of GDP) recording an increase of US$ 39.9 billion or 13.0 per cent over the end-March 2011 level on account of considerable increase in commercial borrowings, short-term trade credits, and rupee denominated NRI deposits. Large recourse to borrowings in particular of those in short-term nature reflect widening financing needs and growing uncertainty in global financial markets as situation in euro zone continued to be fragile.

2. The long-term debt at US$ 267.6 billion and short-term debt (with original maturity) at US$ 78.2 billion accounted for 77.4 per cent and 22.6 per cent, respectively, of the total external debt as at end-March 2012.

3. The share of commercial borrowings continued to be highest at 30.2 per cent in the total external debt as at end-March 2012 followed by short-term debt (22.6 per cent), NRI deposits (16.9 per cent) and multilateral debt (14.6 per cent) (Table 1).

2. Valuation Changes

1. The valuation effect reflecting the appreciation of the US dollar particularly against Indian rupee resulted in decrease in India’s external debt by US$ 11.9 billion during 2011-12. Thus excluding the valuation effects, the stock of external debt as at end-March 2012 would have increased by US$ 51.8 billion over the level at end-March 2011.

3. Components of External Debt

1. Almost all the components of the external debt recorded a rise during the year. The loans under external assistance (multilateral and bilateral debt) increased by around US $ 3.0 billion during 2011-12 as compared with an increase of US$ 8.7 billion in the preceding year (Table 2).

2. Trade credits (both long-term and short-term) increased, by US $ 8.0 billion, as at end-March 2012 as compared to US$ 12.8 billion over the level at end-March 2011.

3. The commercial borrowings increased by US$ 15.8 billion as at end-March 2012 as compared to an increase of US $ 17.8 billion as at end-March 2011 during the corresponding period of the preceding year.

4. The short-term debt increased by US$ 13.2 billion to US$ 78.2 billion as at end-March 2012 as compared to US$ 65.0 billion as at end-March 2011 on account of rise in short-term trade credits, FII investment in T-bills and commercial banks borrowings.

5. NRI deposits increased by US$ 6.9 billion to US $ 58.6 billion as at end-March 2012 over the level as at end-March 2011 primarily on account of increase in rupee denominated NRI deposits reflecting the impact of deregulation of interest rates on these deposits in December 2011.

4. Currency Composition of India’s External Debt

1. India’s external debt mainly consists of major international currencies such as US Dollar, Japanese Yen, Euro, Pound Sterling, Special Drawing Rights (SDR) and the domestic currency i.e., Indian Rupee.

2. The US Dollar denominated debt continues to be the largest with a share of 55.0 per cent in the total external debt as at end-March 2012. The share of Indian rupee in the total external debt stock accounted for 21.4 per cent as at end-March 2012 followed by Japanese Yen (9.1 per cent), and SDR (8.7 per cent). The share of Euro accounted for 3.7 per cent as at end-March 2012.

5. External Debt by Residual Maturity

1. The short-term debt, on the basis of residual maturity, accounted for 42.7 per cent of total external debt as at end-March 2012. The ratio of short-term debt by residual maturity to foreign exchange reserves worked out to 50.1 per cent at end-March 2012 (Table 3).

6. Government and Non-Government External Debt

1. Government (Sovereign) external debt stood at US$ 81.9 billion as at end-March 2012 as against US$ 78.1 billion as at end-March 2011. The share of Government external debt in the total external debt at 23.7 per cent at end-March 2012 was lower than that of 25.5 per cent as at end-March 2011.

2. The share of non-Government debt in total external debt increased to 76.3 per cent as at end-March 2012 from 74.5 per cent at end-March 2011 (Table 4).

7. Select Indicators of External Debt

1. Key indicators of external debt such as debt-GDP ratio, debt service ratio, ratio of foreign exchange reserves to total debt and the short-term debt as per cent to total debt as well as foreign exchange reserves deteriorated as at end-March 2012 as compared to end-March 2011 (Table 5).

Alpana Killawala
Chief General Manager

Press Release : 2011-2012/2103