External debt rises $40 bn in 2011-12

The country’s external vulnerability indicators are showing signs of stress,reflecting the impact of deepening euro zone crisis and global slowdown,says a finance ministry report

Written by ENS Economic Bureau | New Delhi | Published:September 11, 2012 1:27 am

The country’s external vulnerability indicators are showing signs of stress,reflecting the impact of deepening euro zone crisis and global slowdown,says a finance ministry report.

The external debt stock at March-end stood at $345.8 billion as against the March-end,2011 level of $305.9 billion.

“The rise could be attributed mainly to increase in commercial borrowings,short-term debt and non-resident Indian deposits,” according to India’s External Debt status report 2011-12.

While foreign exchange reserves to total debt has declined since 2009-10,debt service ratio and external debt to GDP ratio have increased during the period,thereby indicating the rising stress on external debt position.

As against a external debt to GDP ratio of 18.3 per cent in 2009-10,it stood at 20 per cent in 2011-12 while foreign exchange reserves to total debt stood at 85.1 per cent in 2011-12 from a high of 106.8 per cent in 2009-10.

The report cautions that the global economic risks could rise further with a weakening recovery,sluggish growth prospects and continuing high debt and gross financing needs in several advanced economies.

“Aggravation of external sector risks is reflected in upward movement in India’s current account deficit,falling reserve cover for imports and external debt,depreciating rupee exchange rate,rising levels of external debt and the increasing share of short-term and commercial borrowing in total external debt,” the report said.

Long-term external debt increased 11.1 per cent at $267.6 billion at March-end,2012 while the short-term debt rose 20.3 per cent at $ 78.2 billion. Long-term debt accounted for 77.4 per cent of total external debt at March-end,2012. The share of commercial borrowings in total external debt stock stood at 30.2 per cent,followed by short-term debt,NRI deposits and multilateral debt.

According to the Global Development Finance,2012,of the World Bank,India was fifth in terms of absolute debt stock among the top twenty developing debtor countries.

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