India's external debt declines to US$ 554.5 billion end June 2020

Valuation losses restricts further decline in external debt

India's external debt declined to US$ 554.5 billion end June 2020, recording a decrease of US$ 3.9 billion over its level at end-March 2020. The external debt to GDP ratio increased to 21.8% at end-June 2020 from 20.6% at end-March 2020.

Valuation loss due to the depreciation of the US dollar against major currencies such as euro, yen and SDR2 were placed at US$ 0.7 billion. Excluding the valuation effect, the decrease in external debt would have been US$ 4.5 billion instead of US$ 3.9 billion at end-June 2020 over end-March 2020.

Commercial borrowings remained the largest component of external debt, with a share of 38.1%, followed by non-resident deposits (23.9%) and short-term trade credit (18.2%).

At end-June 2020, long-term debt (with original maturity of above one year) was placed at US$ 449.5 billion, recording a decrease of US$ 2.0 billion over its level at end-March 2020.

The share of short-term debt (with original maturity of up to one year) in total external debt declined to 18.9% at end-June 2020 from 19.1% at end-March 2020; the ratio of short-term debt (original maturity) to foreign exchange reserves declined to 20.8% at end-June 2020 (22.4% at end-March 2020).

Short-term debt on 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 44.0% of total external debt at end-June 2020 (42.4% at end-March 2020) and stood at 48.2% of foreign exchange reserves (49.6% at end-March 2020).

US dollar denominated debt remained the largest component of India's external debt, with a share of 53.9% at end-June 2020, followed by the Indian rupee (31.6%), yen (5.7%), SDR (4.5%) and the euro (3.5%).

The borrower-wise classification shows that the outstanding debt of both government and non-government sectors decreased at end-June 2020.

The share of outstanding debt of non-financial corporations in total external debt was the highest at 42.3%, followed by deposit-taking corporations (except the central bank) (28.1%), general government (18.0%) and other financial corporations (7.4%).

The instrument-wise classification shows that the loans were the largest component of external debt, with a share of 35.4%, followed by currency and deposits (24.3%), trade credit and advances (18.8%) and debt securities (16.3%).

Debt service (principal repayments plus interest payments) increased to 8.1% of current receipts at end-June 2020 as compared with 6.5% at end-March 2020, reflecting lower current receipts.

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