External debt up 9.4% at $335 bn till 2011-end

High commercial borrowings and short-term trade credit led to India’s external debt rising 9.4 per cent to $334.9 billion as on December 31 2011, shrinking the forex cover for the debt to just 88.6 per cent, against 99.6 per cent as on March 31 2011.

Data on external debt released by the finance ministry today showed short-term debt accounted for 23.3 per cent of the total external debt, while the remaining 76.7 per cent was long-term debt. Long-term debt rose to $256.9 billion as on December 31 2011, an increase of $15.8 billion, or 6.5 per cent over the level on March 31 2011, while short-term debt grew $13.1 billion, or 20.1 per cent, to $78.1 billion during the period.

The ratio of short-term external debt to foreign exchange reserves was 26.3 per cent as on December 31, 2011, compared with 21.3 per cent as on March 31, 2011. The lower the short term debt, the better it is for a country, since these have to be repaid in a shorter period.

The share of external commercial borrowings (ECBs) was the highest, at 29.9 per cent, followed by non-resident Indian deposits at 15.7 per cent and multilateral debt at 14.9 per cent, a release said. The Budget proposal to augment ECBs could further increase this share. The Budget had proposed to allow sectors like aviation, power and low-cost housing to tap ECBs.