Rupee fall to make India's debt costlier

A recent profile of sustained depreciation of the rupee against the dollar will show higher amount going from the government kitty towards the repayment of external debt in the Budget. While the government has pegged Rs 12,320 crore towards the repayment in the current financial year, the sum would now increase by Rs 2,464 crore to Rs 14,784 crore.

At the time of the budget, India’s repayment of external debt during 2011-12 was estimated to increase by 5.45 per cent, compared to Rs 11,683 crore for the revised estimates of 2010-11.

However, the depreciation of the rupee of late against the greenback will mean that the external debt in rupee terms will increase by 26.54 per cent in 2011-12, compared to the previous fiscal. Economists said the rise in external debt in the rupee terms would not add much pressure on fiscal deficit.

Deloitte, Haskins & Sells said rupee depreciation would have a marginal impact on repayment of external debt. “The government kitty would not be affected much,” said its director Anis Chakravarty. “But, disinvestment not progressing well, and expenditure burden due to subsidy will have much larger impact on fiscal deficit.”