New Delhi: At end-March 2022, India’s external debt was placed at US$ 620.7 billion which is an increase of US$ 47.1 billion over its level at end-March 2021.
The external debt to GDP ratio declined to 19.9 per cent at end-March 2022 from 21.2 per cent at end-March 2021.
Valuation gains due to the appreciation of the US dollar vis-à-vis Indian rupee and major currencies such as yen, SDR2, and euro were placed at US$ 11.7 billion. Excluding the valuation effect, external debt would have increased by US$ 58.8 billion instead of US$ 47.1 billion at end-March 2022 over end-March 2021.
At end-March 2022, long-term debt (with original maturity of above one year) was placed at US$ 499.1 billion, recording an increase of US$ 26.5 billion over its level at end-March 2021.
The share of short-term debt (with original maturity of up to one year) in total external debt increased to 19.6 per cent at end-March 2022 from 17.6 per cent at end-March 2021. Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves increased to 20.0 per cent at end-March 2022 (17.5 per cent at end-March 2021).
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 43.1 per cent of total external debt at end-March 2022 (44.1 per cent at end-March 2021) and stood at 44.1 per cent of foreign exchange reserves (43.8 per cent at end-March 2021).
US dollar denominated debt remained the largest component of India’s external debt, with a share of 53.2 per cent at end-March 2022, followed by debt denominated in the Indian rupee (31.2 per cent), SDR (6.6 per cent), yen (5.4 per cent), and the euro (2.9 per cent).
Outstanding debt of both government and non-government sectors increased during 2021-22.
The share of outstanding debt of non-financial corporations in total external debt was the highest at 40.3 per cent, followed by deposit-taking corporations (except the central bank) (25.6 per cent), general government (21.1 per cent) and other financial corporations (8.6 per cent).
Loans remained the largest component of external debt, with a share of 33.0 per cent, followed by currency and deposits (22.7 per cent), trade credit and advances (19.0 per cent) and debt securities (17.1 per cent).
Debt service (i.e., principal repayments and interest payments) declined to 5.2 per cent of current receipts at end-March 2022 as compared with 8.2 per cent at end-March 2021, reflecting lower repayments and higher current receipts.
However, the Centre has quashed apprehensions that India could become the next Sri Lanka owning to the high volume of external debt. The government said India’s total external liability is $620.7 billion and the Centre’s share is just $130.8 billion, roughly 21% of the total debt liability which also includes India’s Special Drawing Right (SDR) allocation.
“The rumour doing the rounds that the central government is burdened with debt is baseless,” a source quoted by ET, adding that more than 40% of the debt is by non-financial corporations.
The officials said India’s external debt is $267 billion which is to be paid in less than one year. This triggered a debate that repayments would further erode India’s foreign exchange reserves and lead to depreciation of Indian rupee.
“This analysis is incomplete, incorrect, and it misses some basic facts,” a quoted by ET said.
However, the officials also admitted that payment of $267.7 billion of debt is due in less than one year, the share of the government is just $7.7 billion which is less than 3%, which means the debt level of the government is manageable.