India's external debt declines to US$ 510.4 billion end September 2018

Valuation gains mainly contributes to decline in external debt

India's external debt witnessed a decline of 3.6% at end September 2018 over its level at end-March 2018, on account of a decrease in commercial borrowings and non-resident Indian (NRI) deposits. At end-September 2018, India's external debt was placed at US$ 510.4 billion, recording a decrease of US$ 19.3 billion over its level at end-March 2018. The decrease in the magnitude of external debt was primarily due to valuation gains resulting from the appreciation of the US dollar against the Indian rupee and major currencies.

The external debt to GDP ratio stood at 20.8% at end-September 2018, higher than its level of 20.5% at end-March 2018.

Valuation gains due to the appreciation of the US dollar vis-vis the Indian rupee and major currencies (viz SDR, yen, euro, and pound sterling) were placed at US$ 25.4 billion. Excluding the valuation effect, the increase in external debt would have been US$ 6.1 billion instead of a decrease of US$ 19.3 billion at end-September 2018 over end-March 2018.

Commercial borrowings continued to be the largest component of external debt with a share of 37.1%, followed by NRI deposits (23.9%) and short-term trade credit (19.9%).

At end-September 2018, long-term debt (with original maturity of above one year) was placed at US$ 406.1 billion, recording a decline of US$ 21.4 billion over its level at end-March 2018.

The share of long-term debt (original maturity) in total external debt at end-September 2018 was 79.6%, lower than its level of 80.7% at end-March 2018.

The share of short-term debt (with original maturity of up to one year) in total external debt increased to 20.4% at end-September 2018 from 19.3% at end-March 2018. The ratio of short-term debt (original maturity) to foreign exchange reserves increased to 26.1% at end-September 2018 (24.1% at end-March 2018).

Short-term debt on a residual maturity basis (i.e., debt obligations that include long-term debt by original maturity falling due over the next twelve months and short-term debt by original maturity) constituted 43.8% of total external debt at end-September 2018 (42.0% at end-March 2018) and stood at 55.8% of foreign exchange reserves (52.3% at end-March 2018).

US dollar denominated debt continued to be the largest component of India's external debt with a share of 49.7% at end-September 2018, followed by the Indian rupee (36.1%), SDR (5.3%), yen (4.7%) and euro (3.2%).

Debt service payments declined to 6.5% of current receipts at end-September 2018 as compared with 7.5% at end-March 2018 - reflecting lower repayments of external commercial borrowings.

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