India’s external debt stands at around US$ 390 billion at end-March 2013

The high current account deficit witnessed during 2012-13 and it’s financing increasingly through debt flows particularly by trade credit resulted in significant rise in India ’s external debt during 2012-13. However, magnitude of increase in external debt was offset to some extent due to valuation change (gain) resulting from appreciation of US$ against Indian rupee and other international currencies.

India’s external debt, as at end-March 2013, stands at around US$ 390 billion with a Y-O-Y increase of 12.9% as compared to US$ 376.3 billion, with a with a Y-O-Y increase of 8.9% at end-December 2012. The increase in total external debt during financial year 2012-13 was primarily on account of rise in short-term trade credit. There has been sizeable rise in external commercial borrowings (ECBs) and rupee denominated Non-resident Indian deposits as well. In terms of major components, the share of external commercial borrowings (US$ 120.9 billion) continued to be the highest at 31% of total external debt, followed by short term debt (24.8%) and NRI deposits (18.2%). Excluding the valuation change (gain) due to the movement of US$ (appreciation) against major international currencies and Indian rupee, the external debt as at end-March 2013 would have increased by US$ 55.8 billion over end-March 2012.

Composition of India ’s external debt

Source: Ministry of Finance, Government of India & Reserve Bank of India

Components of external debt -- Almost all the major components of the external debt recorded a rise during the year except bilateral, IMF, exports credits and rupee debt. External debt on account of commercial borrowings increased by US$ 16.1 billion during 2012-13 as compared with US$ 16.3 billion in 2011-12. Trade credit components of external debt (both long-term and short-term) showed an increase of US$ 20.3 billion as at end-March 2013 over end-March 2012. The short-term debt increased by US$ 18.5 billion to US$ 96.7 billion as at end-March 2013 from US$ 78.2 billion as at end-March 2012 mainly on account of rise in short-term trade credit.

NRI deposits increased by US$ 12.2 billion to US$ 70.8 billion as at end-March 2013 over the level as at end-March 2012 primarily on account of increase in rupee denominated NRI deposits reflecting the impact of deregulation of interest rates on these deposits in December 2011. The loans under external assistance (multilateral and bilateral debt) declined by around US$ 0.6 billion during 2012-13 as compared with an increase of US$ 3.2 billion in the preceding year.

Currency composition of India’s external debt --The US$ denominated debt continued to be the largest components of India’s external debt with a share of 57.2% as at end-March 2013, followed by Indian rupee (24%), SDR (7.5%), Japanese Yen (6.3%) and Euro (3.5%).

Government and non-government external debt -- Government (Sovereign) external debt stood at US$ 81.7 billion as at end-March 2013 as against US$ 81.9 billion as at end-March 2012. The shares of Government and non-Government external debt in the total external debt were 20.9% and 79.1%, respectively, as at end-March 2013.

India’s key external debt indicators

Source: Ministry of Finance, Government of India & Reserve Bank of India

Warm Regards,

Dr. S P Sharma

Chief Economist