External debt rises to $440.6 billion in FY14

India's external debt rose 7.6 per cent to $440.6 billion in 2013-14, owing to a rise in the deposits of non-resident Indians (NRIs) and foreign borrowings by banks.

A fall in the country's current account deficit and a revival in equity flows and borrowings by banks through currency swaps helped build foreign exchange reserves, the Reserve Bank of India (RBI) said in its review of India's external debt.

The surge in NRI deposits was primarily due to mobilisation of fresh foreign currency non-resident bank deposits by commercial banks under the central bank's swap scheme during the September-November period last year. RBI said the rise in external debt was partly offset by the valuation change (gains) resulting from appreciation of the dollar against the rupee and other international currencies.

DEBT MATTERS

• Share of short-term debt to total debt declined to 20.3% from 23.6% in 2012-13
• Ratio of short-term debt to forex reserves declined to 29.3% from 33.1% In 2012-13
• Share of ECBs was the highest (33.3%), followed by NRI deposits (23.6%) and short-term debt (20.3%)
• Share of dollar-denominated debt was 61.8%, rupee 21.1%, special drawing rights 6.9%, the yen 5.1% and the euro 3.4%

The share of short-term debt to total debt declined to 20.3 per cent from 23.6 per cent in 2012-13, owing to net repayments of short-term debt. Offloading a part of the investment in Indian debt by foreign institutional investors in 2013-14 also led to a decline in the share of short-term debt.

The ratio of short-term debt to foreign exchange reserves declined to 29.3 per from 33.1 per cent at the end of March 2013.

In terms of the major components of external debt, the share of external commercial borrowings continued to be the highest (33.3 per cent), followed by NRI deposits (23.6 per cent) and short-term debt (20.3 per cent).

RBI said for 2013-14, valuation gains stood at $9.4 billion, reflecting the appreciation of the dollar against major currencies. Had it not been for these gains, external debt would have increased by $40.6 billion, instead of $31.2 billion, during 2013-14

With a share of 61.8 per cent, dollar-denominated debt continued to be the largest component of external debt, followed by the rupee (21.1 per cent), special drawing rights (6.9 per cent), the yen (5.1 per cent) and the euro (3.4 per cent), RBI said.