Fiscal-policy / Fiscal Policy / External Debt.
India's External Debt: Key Points
- Annual Publication:
- The "India's External Debt: A Status Report" is prepared by the Department of Economic Affairs, Ministry of Finance, Government of India, providing a comprehensive analysis of India's external debt position.
- Sources of External Debt:
- India's external debt originates from various sources, including:
- Multilateral sources
- Bilateral sources
- International Monetary Fund (IMF)
- Export Credit
- Commercial Borrowings
- NRI Deposits (dollar)
- Rupee Debt (Foreign Portfolio Investment - FPI; and NRI rupee deposits)
- External Debt Figures (March 2019):
- India's external debt stood at $543 billion as of March 2019.
- The external debt-to-GDP ratio was 19.7%.
- Long-term and Short-term Debt Composition:
- The long-term and short-term debt ratio was approximately 80:20.
- Short-term debt includes all debt with an original maturity of one year or less and interest in arrears on long-term debt.
- Components of External Debt:
- Commercial borrowings constituted the largest component, accounting for 38%.
- NRI deposits held a 24% share.
- Short-term trade credit represented 18.9%.
- Government (Sovereign) debt constituted around 21% of the total external debt.
- Currency Composition:
- US dollar-denominated debt was the largest component at 50.5%.
- Other significant components included the rupee (35.7%), Japanese yen (5%), Special Drawing Rights (SDR) (4.9%), and the Euro (3%).
- Debt Service Payments:
- Debt service payments amounted to 6.4% of current receipts.
- Valuation Effect:
- Changes in the value of the external debt stock over time are influenced by the valuation effect.
- The valuation effect arises due to fluctuations in the US dollar, the international unit for debt, concerning other currencies.
Understanding the composition, sources, and dynamics of external debt is crucial for assessing a country's financial health and its ability to meet international obligations. The currency composition and valuation effects highlight the complexities involved in managing external debt.
