External Debt Down $2 Bn

The total external debt of the country shrunk $2 billion at $98.4 billion at the end of December 2001, compared to $100.4 billion at the end of March 2001.

The annual status paper on external debt released by the finance ministry today, however, warned there would be a drain of about $12 billion in the next fiscal due to repayment obligations under the Resurgent India Bonds. This is around double the usual payment obligations for a normal year.

The report, part of the budget documents, says there has been an absolute decline in the total debt of the country for the first time since the debt crisis in 1991.

The decline of 2.9 per cent in the debt stock compared to December 2000 is a reflection of the improving indicators of external debt. As a result, India has improved its position among the top 15 debtor countries from third in 1991 to ninth in 2000. The report says the Centre has planned to prepay about $2 billion of debt in the current fiscal. It has already prepaid $700 million in the last fiscal.

The debt-service ratio has come down to 13 per cent from 35.3 per cent in 1990-91, while the debt-GDP ratio, signifying the extent of external debt in relation to domestic output, has declined from a high of 38.7 per cent in 1991-92 to 20.7 per cent at the end of December 2001.

Of the total debt, short-term debt has also declined to $2.75 billion compared to $3.48 billion in March 2001.

The total short-term debt, the most volatile element of external debt, stood at $8.54 billion in 1991 out of a total debt stock of $75.28 billion.

The status report says the ratio of the country's short-term debt to the forex reserve ratio is now the lowest among the top 15 indebted countries of the world, while its debt-GNP ratio is the second lowest after China.

The top indebted country in 2000 is Brazil with a total external debt of $238 billion while Russia follows next at $160.3 billion.

The paper claims prudent debt management by the government, including limiting short-term debt, encouraging non-debt creating flows and keeping the maturity structure of external debt under manageable limits, has put India in a comfortable debt service position.