The external debt has gone up 4.6 times since 1991

India’s external debt situation worsened for the eleventh consecutive year, data released by Reserve Bank of India showed.

The country’s external debt touched $390 billion in the year ended March 31, 2013, a rise of 12.9 per cent over the previous year’s debt.

Under the UPA’s regime, which began in 2004, India’s external debt has jumped 3.4 times, or $277.4 billion.

A higher external debt indicates the vulnerability of the country’s economic position. This means, as on the reporting date, the country owes $390 billion to different stakeholders.

“There is a strong co-relation between growing GDP and increasing external debt as the country’s demand for energy and gold has been growing substantially. We are borrowing more to meet this demand,” said M.R. Das, a former senior economist of a large commercial bank.

Almost all the parameters, which comprise the external debt situation worsened in the reporting fiscal.

External commercial borrowings by Indian companies contributed almost a third of this external debt. The share of Non-Resident Indian deposits was 18.2 per cent of the external debt. Worryingly, short-term debt constituted about a fourth of the country’s external debt.

The long term debt – which includes external commercial borrowings, borrowings from multilateral and bilateral agencies, among other things – forms 75.2 per cent of the total external debt.

The long-term debt component has, however, shown a declining trend over the years, from 80.7 per cent in 2009 to 75.2 per cent in 2013.

However, the worrying trend is that the short-term debt has been continuously rising over the past five years. It was 19.3 per cent of the total debt in 2009 and has risen to 24.8 per cent in 2013. The immediate risk of this high external debt is the pressure on the rupee, Das said.

Currency Composition

The debt denominated in US dollar continued to form a lion’s share of the total debt at 57.2 per cent. This was followed by Indian rupee at 24 per cent, Special Drawing Rights at seven per cent, Japanese yen at 6.3 per cent and euro at 3.5 per cent.

The Government must focus on enhancing its manufacturing sector export capabilities to bring the situation under control in the long term, Das said.

(This article was published on June 27, 2013)
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