The Hindu Business Line : External debt marginally up at $125 b in 2005-06

Rising factors
Short-term debt increases to $8.78 billion.
Export credit rises by $346 million to $5.32 billion.
Multilateral debt up at $32.55 billion.
Bilateral loans declines by $1.14 billion to $15.78 billion.

New Delhi , Sept. 11

India's external debt increased marginally to $125.2 billion at end-March from $123.2 billion at end-March 2005. The marginal increase in the last fiscal was mainly due to the rise in non-resident deposits, which escalated by $2.4 billion, and a surge in short-term debt, which has gone up by $1.26 billion.

However, this was partially offset by a contraction of $1.46 billion in commercial borrowings.

Non-resident deposits

The escalation in non-resident deposits (long-term) to $35.1 billion at end-March ($32.7 billion) was due to higher inflows during 2005-06, reflecting the effect of upward revision in interest rates and flow-back of part of India millennium deposits (IMD) redemptions into the NRI deposits.

Short-term debt

Short-term debt increased to $8.78 billion at end-March($7.52 billion) because of rise in trade credits on larger import demand, according to the Twelfth Status Report on India's External Debt released by the Finance Ministry here on Monday.

Commercial borrowing

While commercial borrowing showed a contraction of $1.46 billion ($27.02 billion)to $25.56 billion at end-March, export credit increased by $346 million to $5.32 billion ($4.98 billion).

According to the status report, trade credits and commercial borrowings put together showed a contraction of $1.1 billion over the year owing to redemption of IMDs.

Multilateral debt at end March 2006 stood at $32.55 billion, up by $ 856 million ($31.70 billion). Bilateral loans declined by $1.14 billion to $15.78 billion.

As against an external debt accumulation of $ 11.6 billion in 2004-05, the status report highlighted that accumulation of external debt in 2005-06 was smaller at $2 billion. This was essentially due to redemption of IMDs of $ 5.5 billion in December 2005.

External debt

The report also noted that external debt indicators have improved from strength to strength during the last few years despite an increase in the volume of debt.

External debt-to-GDP ratio has dropped gradually from 38.7 per cent in 1991-92 to 15.8 per cent in 2005-06. Debt service ratio (debt services as a proportion of current receipts) declined over the years to reach a level of 6.1 per cent (excluding the one-off transaction of repayments under IMDs) in 2005-06.

Like-wise, short-term debt to total debt and short-term debt to forex assets have shown gradual improvement.

The moderation in debt accumulation and improvement in debt sustainability indicators during the post-reform period essentially reflect committed efforts of the Government to keep external debt within manageable limits, the status report said.

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