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Reserve Bank of India
Exchange Control Department
Central Office
Mumbai – 400 001
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India’s External Debt as at the end of
March 2006: Highlights
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The valuation effect, on account of
appreciation of the US dollar against other major international
currencies, has had a moderating impact on the stock of external
debt.
Among the various
components of debt, NRI deposit, trade credit and multilateral
debt have risen during the year (Table 2).
External
commercial borrowings (ECBs), bilateral and rupee debt declined
during the year. External commercial borrowings recorded net
outflows due to one-off effect of principal repayment of India
Millennium Deposits (IMDs) (US $ 5.5 billion) (Table 2) (Chart 2).
Table 2: Variation in External Debt
by Components
|
Item
|
At the
end-of
|
Variation
during 2005-06
|
|
March 06
|
March 05
|
|
Amount
|
Amount
|
Absolute
variation
|
Percentage
variation
|
|
(US $
million)
|
(US $
million)
|
(US $
million)
|
(Per cent)
|
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
|
1. Multilateral
|
32,558
(26.0)
|
31,702
(25.7)
|
856
|
2.7
|
|
2. Bilateral
|
15,784
(12.6)
|
16,930
(13.7)
|
-1,146
|
-6.8
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3. IMF
|
0
(0.0)
|
0
(0.0)
|
0
|
0.0
|
|
4. Trade Credit
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|
|
|
|
|
a. Above 1 year
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5,326
(4.3)
|
4,980
(4.1)
|
346
|
6.9
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|
b. Upto 1 year*
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8,788
(7.0)
|
7,524
(6.1)
|
1,264
|
16.8
|
|
5. Commercial Borrowings
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25,560
(20.4)
|
27,024
(21.9)
|
-1,464
|
-5.4
|
|
6. NRI Deposits (long-term)
|
35,134
(28.1)
|
32,743
(26.6)
|
2,391
|
7.3
|
|
7. Rupee Debt
|
2,031
(1.6)
|
2,301
(1.9)
|
-270
|
-11.7
|
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8.Total Debt
|
1,25,181
(100.0)
|
1,23,204
(100.0)
|
1,977
|
1.6
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Memo Items
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A. Long-Term Debt
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1,16,393
(93.0)
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1,15,680
(93.9)
|
713
|
0.6
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B. Short-Term Debt
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8,788
(7.0)
|
7,524
(6.1)
|
1,264
|
16.8
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- The US dollar was the most important currency
in the currency composition of India’s external debt at
end-March 2006, accounting for 45.1 per cent of total external
debt stock (Chart 3).
Indicators of Debt Sustainability
There has been a perceptible
improvement in external debt indicators over the years reflecting
the growing sustainability of external debt of India.
- External debt to GDP has dropped to 15.8 per
cent at end-March 2006 from 17.3 per cent at end-March 2005
and 30.8 per cent at end-March 1995.
- The debt service ratio has risen to 10.2 per
cent during 2005-06 from 6.1 per cent during 2004-05 largely
due to IMD repayments. It may be indicated that debt service
ratio was 17.1 per cent in 1999-2000.
Reflecting
the rise in short term debt during 2005-06, the ratio of
short-term to total debt and short term debt to reserves rose to
7.0 per cent and 5.8 per cent, respectively (Table 3).
Table 3:
Indicators of Debt Sustainability (in per cent)
|
Indicators
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End-March 06
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End-March 05
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|
(1)
|
(2)
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(3)
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Total debt /GDP
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15.8
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17.3
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Short-term/Total debt
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7.0
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6.1
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Short-term debt/Reserves
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5.8
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5.3
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Concessional debt/Total
debt
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31.5
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33.3
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Reserves/ Total debt
|
121.1
|
114.9
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Debt Service Ratio*
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10.2
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6.1
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*
relates to fiscal year 2005-06 and 2004-05
- The share of concessional debt in total
external debt declined to 31.5 per cent at end-March 2006 from
33.3 per cent at end-March 2005 (Table 3). It may be recalled
that this ratio was around 45.9 per cent at end-March 1991.
This development indicates a gradual increase in non-concessional
private debt in India's external debt stock. At this level,
however, concessional debt continues to be a significant
proportion of the total external debt, especially by
international comparison.
- India’s foreign exchange reserves exceeded
the external debt by US $ 26.4 billion providing a cover of
121.1 per cent to the external debt stock at the end of March
2006 (Chart 4).
Full details of the
evolution of the debt stock over the period March 2005 to March
2006 are set out in Statement
1 and 2.
Alpana Killawala
Chief General Manager
Press Release : 2005-2006/1710
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