Short-term external debt falls sequentially in Dec

External debt rose 5.2% at Dec-end from $402.8 bn at the end of March 2013

The short-term portion of India's external debt declined 2.2 per cent to $92.71 billion at the end of December 2013 against $94.76 bn as on September 30 of the year, showed data issued by the finance ministry.

Since short-term debt comprises money coming for redemption within a year, it means at least $92.71 bn will mature by December 31, 2014. More money could also come for redemption, as the ministry data does not give data by the residual maturity.

"On incremental short-term external debt, we have a bit of a relief," said Aditi Nayar, economist at rating agency ICRA.

The fall was due to outflows by foreign institutional investors (FIIs) from the debt segment and fall in trade-related credit, said the ministry.

The short-term portion comprised 21.8 per cent of total external debt, which was $426 bn at the end of 2013 against $402 bn in end-September 2013 (23.5 per cent of the total).

It is always safer to have less short-term external debt, as a lesson from the East Asian crisis. India's short-term debt was 24.6 per cent of total external debt in 2012, against 67.6 per cent in the case of China. The latter's portion is higher because of trade-related credit. However, China has much greater foreign exchange reserves; $3.18 trillion in 2012 against $296.57 bn for India. In fact, India's forex cover to total external debt has been declining over the years.

India's total external debt rose 5.9 per cent to $426 bn as on December 31, 2013, against $402 bn as on September 30, 2013. It was largely because of NRI (non-resident Indian) deposits, which increased due to the swap facility of the Reserve Bank of India.

Giving a six-month comparison, the finance ministry said,"“The rise in external debt during the period was due to long-term debt, particularly NRI deposits. A sharp increase in NRI deposits reflected the impact of fresh FCNR(B) deposits mobilised under the swap scheme during September-November 2013.”

India's external debt rose 5.2 per cent at end-December from $402.8 bn at the end of March 2013.

Total NRI deposits rose $23.8 bn during the third quarter of 2012-13, to $98.6 bn at end-December.

The fact that the rise in external debt was primarily due to NRI deposits under the swap scheme is a bit of comfort, as there was a condition of at least a three-year maturity in these.

Forex cover to total external debt declined to 69 per cent at the end of 2013 against 69.3 per cent at end-September. It exceeded 100 per cent of external debt till 2009-10. India’s external debt to GDP ratio was 23.3 per cent at end-December 2013 against 22.2 per cent in September-end.

Commercial borrowings accounted for 31.5 per cent of total external debt, followed by NRI deposits (23.2 per cent) and multilateral debt (12.3 per cent).

The government's (sovereign) external debt was $76.4 bn, about 17.9 per cent of total external debt.

The share of US dollar-denominated debt was the highest in the external debt stock, at 63.6 per cent. It was followed by debt denominated in the rupee (19.4 per cent), Special Drawing Rights (7.1 per cent), Japanese yen (five per cent) and euro (3.1 per cent).