The share of external commercial borrowings (ECBs) in foreign loans availed by India fell to 69 per cent in the first quarter of 2012 due to lower disbursements.

In the corresponding quarter of the previous year, ECB disbursements constituted 81 per cent of total foreign loan approvals.

ECB approvals during Q1 of 2012-13 stood marginally lower at around $7.6 billion, compared to $8 billion in the corresponding period of the previous year. The fall in actual disbursements was on account of subdued domestic economic activity and risk aversion due to exchange rate volatility.

As a consequence, the share of ECBs in India’s external debt has remained more or less the same over the past one year.

External commercial borrowings by Indian companies totalling $104.8 billion accounted for nearly 30 per cent of the country’s total external debt in June 2012.

But this was a sizeable increase in comparison to the 27.1 per cent share of ECBs in total external debt in June 2010.

With respect to overall debt, the nation’s external liabilities rose by 10.5 per cent during the one-year period leading up to June 2012, touching $349.5 billion. In comparison to June 2010, the country’s external debt has risen by 29.3 per cent, as per RBI data.

The bulk of India’s external debt at the end of the first quarter was dollar-denominated, accounting for 56.3 per cent of the cumulative burden. It was 55 per cent in end-March 2012 and 53.6 per cent in FY11.

There has also been a rise in India’s rupee-denominated debt, which rose to 21.4 per cent in end-June 2012 from 19.2 per cent a year ago.

In contrast, Japanese yen debt fell to 9.1 per cent from 11.1 per cent of total borrowings and euro-denominated liabilities to 3.3 per cent from 3.7 per cent. Debt owed in pounds sterling also declined to 0.9 per cent from 1.7 per cent during the one year period from June 2011 to June 2012.

India’s Special Drawing Rights (SDR) debt to the IMF also fell to 8.3 per cent from 9.5 per cent. But liabilities in alternative currencies, including China’s renminbi, rose to 0.7 per cent of total external debt in June 2012 from 0.6 per cent a year ago.

The composition of India’s external debt remained more or less unchanged in June 2012 vis-à-vis the year-ago period.

But India’s outstanding external debt at the end of the first quarter of 2012-13 was lower than at the start of the fiscal. This reflects both lower disbursements and higher repayments during the quarter.

(This article was published on December 9, 2012)
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