India’s $620bn external debt ‘sustainable’ says Finance Ministry report


India’s external debt, which stood at $620.7 billion at the end of March 2022, is sustainable and prudently managed, said the Department of Economic Affairs, which falls under the Union Ministry of Finance.

In a recent report, the Economics Department said the country’s external debt continues to be sustainable and prudently managed.

“At the end of March 2022, it stood at $620.7 billion, up 8.2% from the level a year ago. External debt as a percentage of GDP (gross domestic product) was 19.9%, while the reserve-to-external-debt ratio was 97.8%,” the report said.

Sovereign debt at $130.7 billion was up 17.1% from its level a year ago, mainly due to the additional allocation of special drawing rights (SDRs) by the IMF in 2021-22.

Non-sovereign debt, on the other hand, rose 6.1% to $490 billion from the end-March 2021 level.

Experts had said that the external debt of $620.7 billion should not be cause for concern, as $490 billion is non-governmental and the government’s share is only $130.8 billion.

In non-government debt, the share of non-financial corporations was about $250.2 billion.

Additionally, the total debt of $620.7 billion as a percentage of gross domestic product (GDP) was 19.9% ​​and the debt service ratio was 5.2%.

Experts have also said that India cannot be compared to Sri Lanka which is going through a severe economic crisis.

The central government’s share of short-term debt – maturing in a year – is only $7.7 billion out of a total of $267 billion, experts say.

Commercial borrowings, NRI deposits and short-term commercial credits are the three main components of non-sovereign debt, accounting for up to 95.2%.

While NRI deposits fell 2% to $139 billion, commercial borrowings at $209.71 billion and short-term commercial credits at $117.4 billion were up 5.7% and 20 .5%, respectively.

Debt vulnerability indicators remained benign, according to the report. The debt service ratio declined significantly to 5.2% in 2021-22 from 8.2% the previous year, reflecting buoyant current receipts and moderating debt service payments. external debt.

Debt service payment obligations arising from outstanding external debt at end-March 2022 are expected to follow a downward trend over the next few years.

From an international perspective, India’s external debt is modest. In terms of various debt vulnerability indicators, India’s sustainability was better than that of low- and middle-income countries (LMICs) as a group and vis-à-vis many of them individually.

According to the report, the US dollar continues to be the main currency of denomination, accounting for 53.2% of the total at the end of March 2022.

Deposits in Non-Resident (External) Rupee (NR(E)RA) accounts, NRO accounts and REIT investments in Gsec and corporate bonds are among the components of India’s external debt, denominated in Indian rupees.

The Indian rupee is the second currency of denomination with a lower share of 31.2% of the total at the end of March 2022 to 33.3% a year ago, reflecting the erosion of the stock of REIT investments in G-Sec and corporate bonds ($50.1 billion). of $51.4 billion at the end of March 2021) and NRE account balances ($100.8 billion compared to $102.6 billion). After the US dollar and the Indian rupee come the SDRs (6.6%), the Japanese yen (5.4%) and the euro (2.9%).



(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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