India's external debt jumps 12 per cent

India’s total external debt increased 11.9 per cent to $251.4 billion as on December 31, 2009, over March 31, 2009, estimates of $224.6 billion, largely on account of depreciation of the dollar. Long-term debt increased 13.8 per cent to $206.2 billion, while short-term debt increased 4.3 per cent to $45.2 billion compared to the end-March estimates of $181.2 billion and $43.4 billion, respectively.

Of the total increase of $26.8 billion in external debt, the valuation effect on account of depreciation of the dollar against major currencies accounted for $9.9 billion, or 40 per cent. “This implies if the dollar had not depreciated against major currencies, the increase in total external debt would have been only $16.9 billion to $241.5 billion,” said a finance ministry release.

The government’s (sovereign) external debt was $66.9 billion, constituting 26.6 per cent of the total external debt as of end-December 2009 as against $55.9 billion at end-March 2009, when its share was 24.9 per cent. The ratio of the government’s external debt to gross domestic product had remained around 5 per cent in the last three years, said the release.

The dollar-denominated debt accounted for 52 per cent of the total external debt at end-December 2009, followed by rupee debt at 17.2 per cent, yen 12.7 per cent, special drawing rights (SDRs) 11.4 per cent and euro at 4.2 per cent.

The debt-service ratio--the ratio of total debt service payments to current receipts--increased to 5.1 per cent during April-December 2009 as against 4 per cent in April-December 2008. The ratio of short-term external debt to foreign exchange reserves decreased from 17.2 per cent at end-March 2009 to 15.7 per cent at end-December 2009.

Compared to March-end 2009, the largest increase of $7.5 billion under the head 'commercial borrowings' was on account of commercial activities picking up on the back of the positive economic outlook in 2009-10. Non-resident Indian deposits accounted for an increase of $5.9 billion, followed by an increase of $5.2 billion under the head ‘IMF’ compared to end-March 2009.

The large increase under the head 'IMF' was due to allocations of SDR 3,082.5 million on August 28, 2009, and SDR 214.57 million on September 9, 2009, and the consequent increase in cumulative SDR allocations to $6.3 billion at end-September 2009. It marginally declined to $6.2 billion at end-December 2009. Multilateral debt registered a rise of $3.2 billion, followed by bilateral debt ($1.7 billion) and export credit ($1.2 billion) during the same period.