Indian exposure to US debt down by $6.3 bn in 2011

India lowered its exposure to the US government's debt by $6.3 billion (over Rs 30,000 crore) in 2011, even as a few countries like Japan, France, Brazil and the UK enhanced their holding of US treasury bonds.

As per the latest foreign holding data for the US Treasury Bonds, the debt securities issued by the US government, India ranked as the 18th largest foreign holder of these bonds at the end of 2011, down from 15th a year earlier.

While China remains the largest foreign holder of the US treasury bonds, it has lowered its exposure during 2011. A number of other countries such as Taiwan, Hong Kong, Russia, Luxembourg and Singapore also pared their holdings.

However, Japan, the UK, Switzerland, Canada, Germany, Thailand, Ireland, Belgium and South Korea saw their holdings of the US treasury bonds increase during the year.

At the end of December 2011, India held US treasury bonds worth $34.2 billion, as against China's $1.1 trillion.

Other major foreign holders include Japan ($1.04 trillion), the UK ($414.8 billion), Brazil ($206.9 billion) and Taiwan (149.2 billion), while Switzerland and Hong Kong also own treasury bonds worth over $100 billion.

India's holding has declined from $40.5 billion at the end of December 2010, while China's dipped from $1,160 billion to $1100 billion during the year.

The Indian holding increased during the month of December 2011 by about $500 million, but it was on a declining trend for seven straight months prior to that. Between May and November 2011, India's holding fell by about $8.4 billion.

The monthly foreign holding data is released by the US Treasury Department with a delay of about one and half months. The data for January 2012 would be released around the middle of the next month.

The Indian holding stood at a record high level of $42.2 billion in June 2009.

In India, the US treasury bonds are mostly held by the Reserve Bank, while some financial institutions and foreign branches of Indian banks also hold some of these securities.

RBI holds the US treasury securities as part of its foreign exchange reserves portfolio.

The Indian holding started dipping even before the first- ever sovereign rating downgrade of the US in August last year.

It was widely feared that many of the US treasury investors, including foreign entities, would cut their holdings after the downgrade by credit ratings agency S&P. It had cited reasons like inadequate steps by the US to contain ballooning debt for taking the historic action.

Soon after the downgrade, the total debt of the US had moved close to $15 trillion and currently it stands at about $15.5 trillion. Out of this, the US owes nearly $4.7 trillion to foreign countries that hold US Treasury bonds.