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Finance Minister Nirmala Sitharaman has said that India’s external debt is modest from a cross-country perspective. Total external debt rose by around 1 per cent to over $624 billion in 2023-24.
According to a Finance Ministry report, the current foreign exchange reserve is sufficient to cover around 93 per cent of total debt. “From a cross-country perspective, India’s external debt position is comfortable based on the standard set of indicators of debt vulnerability, measured both in terms of nominal and present value,” the report said. It may be noted that as on August 25, forex reserve was at $594.86 billion.
The report highlighted a valuation gain of $20.6 billion as of end-March 2023 due to appreciation of the dollar vis-a-vis the rupee and other major currencies such as yen, SDR, and euro. Excluding the valuation effect, external debt would have increased by $26.2 billion instead of $5.6 billion as of end-March 2023 over end-March 2022. External debt as a ratio to GDP declined to 18.9 per cent as of end-March 2023 from 20 per cent as of end-March 2022.
In the foreward to the report, Sitharaman said the debt service ratio at 5.3 per cent was within comfort zone. The long-term debt constituted 79.4 per cent of the total external debt while short-term debt was 20.6 per cent. Short-term debt is basically incurred to financing imports, enhancing the stability aspects of the total external debt, she said.
Total global debt
As on December 2022, total global debt was $9.32 trillion while for India it was $613.1 billion placing it at the 22nd position. Calling India’s external debt modest from a cross-country perspective, Sitharaman said that India’s share of long-term debt in total external debt was at 78.9 per cent, against a global average of 58.6 per cent.
“From a cross-country perspective, India’s external debt position is better than most of the low and middle-income countries, as measured by select vulnerability indicators such as share of short-term debt in total external debt, external debt to GNI, forex reserves to external debt and external debt to exports,” she said.
Sovereign External Debt (SED), accounting for 21.3 per cent of the total external debt, rose 1.9 per cent to $133.3 billion as of end-March 2023. Non-SED, accounting for 78.7 per cent of the total external debt, saw a growth of 0.6 per cent to $491.3 billion as of end-March 2023. Although SED and non-SED have increased in absolute terms as of end-March 2023, they have reduced in terms of ratio to GDP. While the ratio of SED to GDP reduced to 4.0 per cent from 4.2 per cent, the ratio of non-SED to GDP reduced to 14.8 per cent as of end-March 2023 from 15.8 per cent as of end-March 2022.
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