As per the standard practice, India's external debt statistics for the quarters ending March and June are released by the Reserve Bank of India and those for the quarters ending September and December by the Ministry of Finance, Government of India. The external debt data are released with a lag of one quarter. The external debt data, as compiled in the standard format, as at end-March 2010 in Rupees and US dollar terms and revised data for the earlier quarters are set out in Statement 1 and 2, respectively. The major developments relating to India’s external debt as at end-March 2010 are presented in the following paragraphs.

Major Highlights

(i) India’s external debt, as at end-March 2010, was placed at US $ 261.4 billion (18.9 per cent of GDP) recording an increase of US $ 36.9 billion or 16.5 per cent over the end-March 2009 level on account of significant increase in IMF liabilities due to additional allocations of SDR, commercial borrowings, NRI deposits and short-term trade credits.

(ii) Excluding the valuation effects due to depreciation of US dollar against other major international currencies and Indian Rupee, the stock of external debt has increased by US$ 30.4 billion over the stock as at end-March 2009.

(iii) The share of commercial borrowings stood highest at 27.2 per cent as at end-March 2010 followed by short-term debt (20.1 per cent), NRI deposits (18.4 per cent) and multilateral debt (16.3 per cent).

(iv) The debt service ratio increased to 5.5 per cent during 2009-10 as compared to 4.6 per cent during 2008-09.

(v) Based on residual maturity, short-term debt accounted for 41.2 per cent of the total external debt as at end-March 2010. Whereas the share of short-term debt, by original maturity, was 20.1 per cent of the total external debt stock.

(vi) The ratio of short-term debt to foreign exchange reserves at 18.8 per cent as at end- March 2010 was higher compared to 17.2 per cent as at end-March 2009.

(vii) The US dollar accounted for 58.2 per cent of the total external debt stock as at end-March 2010 followed by Indian rupee (13.8 per cent).

(viii) India’s foreign exchange reserves provided a cover of 106.7 per cent to the external debt stock at the end of March 2010 as compared with 112.2 per cent as at end-March 2009.

1. India’s External Debt as at end-March 2010

(i) India’s external debt, as at end-March 2010, was placed at US$ 261.4 billion (18.9 per cent of GDP) recording an increase of US$ 36.9 billion or 16.5 per cent over the end-March 2009 level on account of significant increase in IMF liabilities due to additional allocations of SDRs by the IMF, commercial borrowings, NRI deposits and short-term trade credits.

(ii) The long-term debt at US$ 209.0 billion and short-term debt at US$ 52.4 billion accounted for 79.9 per cent and 20.1 per cent, respectively, of the total external debt as at end-March 2010.

(iii) The share of commercial borrowings continued to be highest at 27.2 per cent in the total external debt as at end-March 2010 followed by short-term debt (20.1 per cent), NRI deposits (18.4 per cent) and multilateral debt (16.3 per cent) (Table 1).

2. Valuation Changes

(i) The valuation effect reflecting the depreciation of the US dollar against other major international currencies and Indian rupee resulted in an increase in India’s external debt by US$ 6.6 billion during 2009-10. This implies that excluding the valuation effects, the stock of external debt as at end-March 2010 would have increased by US$ 30.4 billion over the level at end-March 2009.

(ii) Compared with the previous quarter (end-December 2009), the valuation effect reflecting the appreciation of the US dollar against other major international currencies and Indian rupee resulted in a decline of US$ 1.0 billion in India’s external debt. This implies that excluding the valuation effects, the stock of external debt as at end-March 2010 would have increased by US$ 10.6 billion over the level at end-December 2009 (Table 2).

3. Components of External Debt

(i) The loans under external assistance (multilateral and bilateral debt) increased by US$ 5.2 billion during 2009-10 compared with a lower increase of US$ 1.0 billion during the previous year (Table 3).

(ii) The increase in IMF liability at US$ 6.0 billion as at end-March 2010 was due to additional allocation to SDRs by the IMF amounting to US $ 4.7 billion under the general allocation on August 28, 2009 and US$ 0.3 billion under the special allocation on September 9, 2009.

(iii) Trade credits (both long-term and short-term) increased, by US $ 10.0 billion, as at end-March 2010 compared to US$ 2.2 billion over the level at end-March 2009.

(iv) The commercial borrowings increased by US$ 8.6 billion as at end-March 2010 over its level as at end-March 2009 as compared to a negligible increase  during the corresponding period of the previous year.

(v) The short-term debt increased by US$ 9.1 billion to US$ 52.5 billion as at end-March 2010 as compared to US$ 43.4 billion as at end-March 2009 mainly on account of rise in short-term trade credits.

(vi) Outstanding NRI deposits at US $ 48.1 billion as at end-March 2010 increased by US$ 6.5 billion over the level as at end-March 2009 mainly on account of valuation effects .

4. Currency Composition of India’s External Debt

(i) The currency composition of India’s external debt consists of major international currencies such as US Dollar, Japanese Yen, Euro, Pound Sterling, Special Drawing Rights (SDR) and the domestic currency i.e., Indian Rupee.

(ii) The US Dollar denominated debt continues to be the largest with a share of 58.2 per cent in the total external debt as at end-March 2010.  The share of Indian rupee in the total external debt stock accounted for 13.8 per cent as at end-March 2010 followed by Japanese yen (11.4 per cent), and SDR (10.7 per cent). The share of Euro accounted for 3.6 per cent as at end-March 2010 (Table 4).

5. Instrument-wise Classification of External Debt

(i) The instrument-wise classification of India’s external debt across the borrower category reveals that loans accounted for 49.0 per cent of total debt outstanding as at end-March 2010 as compared to 52.9 per cent as at end-March 2009 (Table 5).

(ii) The share of trade credit (long-term and short-term) at 19.0 per cent as at end-March 2010 recorded a marginal increase as compared to 18.6 per cent as at end-March 2009.

(iii) The share of currency and deposits at 18.7 per cent of the total India’s external debt as at end-March 2010 showed a marginal decline as against 18.8 per cent as at end-March 2009.

6. External Debt by Residual Maturity

(i) While external debt is generally compiled in terms of original maturity, analysing the external debt, in particular short term debt in terms of residual maturity is important from the point of view of foreign exchange liquidity management and to ascertain the total foreign exchange outgo on account of debt service payments in the immediate future.

(ii) The ‘short-term debt by residual maturity’ comprises the repayments due under medium and long-term debt by original maturity during one year reference period along with the short-term debt with original maturity. The balance constitutes the long-term debt by residual maturity.

(iii) The repayments due within the next one year under medium and long-term debt constitute 51.3 per cent of the total short-term debt by residual maturity as at end-March 2010.

(iv) Based on residual maturity, the short-term debt accounted for 41.2 per cent of total external debt as at end-March 2010. The ratio of short-term debt by residual maturity to foreign exchange reserves worked out to 38.6 per cent at end-March 2010 (Table 6).

7. Government and Non-Government External Debt

(i) Government (Sovereign) external debt stood at US$ 67.1 billion as at end-March 2010 as against US$ 54.8 billion as at end-March 2009. The share of Government external debt in the total external debt increased by 25.7 per cent as at end-March 2010 from 24.4 per cent as at end-March 2009.

(ii) The share of non-Government debt in total external debt has increased steadily over the period. As at end-March 2010, the share of non-Government debt in total external debt, however, declined to 74.3 per cent from 75.6 per cent at end-March 2009 (Table 7).

8. Select Indicators of External Debt

(i) The ratio of external debt to GDP declined to 18.9 per cent as at end-March 2010 from 20.5 per cent as at end-March 2009 (Table 8).

(ii) The debt service ratio increased to 5.5 per cent during 2009-10 as compared to 4.6 per cent during 2008-09.

(iii) India’s foreign exchange reserves provided a cover of 106.7 per cent to the external debt stock at the end of March 2010 as compared to 112.2 per cent as at end-March 2009.

(iv) The share of concessional debt in total external debt declined to 16.8 per cent as at end-March 2010 from 18.7 per cent at end-March 2009 reflecting the sustainable increase in non-concessional private debt in India's external debt stock.

(v) The ratio of short-term debt to foreign exchange reserves at 18.8 per cent as at end-March 2010 was higher than that of 17.2 per cent in the previous year.

(vi) The share of short-term debt in total debt increased to 20.1per cent at end-March 2010 from 19.3 per cent at end-March 2009.

Ajit Prasad
Manager

Press Release : 2009-2010/1793