As per the standard practice, India's external debt statistics for the quarters ending March and June are released by the Reserve Bank of India and those for the quarters ending September and December by the Ministry of Finance, Government of India. The external debt data are released with a lag of one quarter. A detailed account of external debt as compiled in the standard format as at end-March 2009 in rupee and US dollar terms and revised data for the earlier quarters are set out in Statement 1 and 2, respectively. The developments relating to India’s external debt as at end-March 2009 are discussed in the following paragraphs.

Major Highlights of External Debt

(i) India’s external debt, as at end-March 2009, was placed at US $ 229.9 billion (22.0 per cent of GDP) recording an increase of US $ 5.3 billion or 2.4 per cent over the level of the previous year mainly due to the increase in trade credits.

(ii) As per an international comparison of external debt of the twenty most indebted countries, India was the fifth most indebted country in 2007.

(iii) By way of composition of external debt, the share of commercial borrowings was the highest at 27.3 per cent as at end-March 2009 followed by short-term debt (21.5 per cent), NRI deposits (18.1 per cent) and multilateral debt (17.2 per cent).

(iv) The debt service ratio has declined steadily over the years, and stood at 4.6 per cent as at end-March 2009.

(v) Excluding the valuation effects due to appreciation of US dollar against other major currencies and Indian rupee, the stock of external debt would have increased by US$ 18.7 billion as compared with the stock as at end-March 2008.

(vi) The share of short-term debt in total debt increased to 21.5 per cent at end-March 2009 from 20.9 per cent at end-March 2008, primarily on account of rise in short-term trade credits.

(vii) Based on residual maturity, the short-term debt accounted for 40.6 per cent of the total external debt at end-March 2009

(viii) The ratio of short-term debt to foreign exchange reserves at 19.6 per cent in March 2009 was higher compared to 15.2 per cent in March 2008.

(ix) The US dollar continues to remain the dominant currency accounting for 57.1 per cent of the total external debt stock as at end-march 2009.

(x) India’s foreign exchange reserves provided a cover of 109.6 per cent to the external debt stock at the end of March 2009 as compared with 137.9 per cent as at end-March 2008.

1. Stock of India’s External Debt as at end-March 2009

(i) India’s external debt, as at end-March 2009, was placed at US $ 229.9 billion (22.0 per cent of GDP) recording an increase of US $ 5.3 billion or 2.4 per cent over the end-March 2008 level mainly due to the increase in trade credits. (Table 1 and Chart 1).

Table 1: External Debt Outstanding
(US $ billion)
At end of	Total	Variation
	External Debt	Over corresponding  Quarter of Previous year		Over Previous Quarter
		Amount	Per cent	Amount	Per cent
1	2	3	4	5	6
March  2007	171.3	33.2	24.0	10.9	6.8
June  2007	182.3	37.3	25.7	11.0	6.4
September  2007	195.6	45.0	29.9	13.3	7.3
December 2007	206.0	45.6	28.4	10.4	5.3
March 2008	224.6	53.3	31.1	18.6	9.0
June 2008	223.6	41.3	22.6	-1.0	-0.5
September 2008	223.5	27.9	14.3	0.0	0.0
December 2008	229.3	23.3	11.3	5.7	2.6
March 2009 P	229.9	5.3	2.4	0.6	0.3
P: Provisional Source: Ministry of Finance, Government of India and Reserve Bank of India.

2. Valuation Changes

(i) The valuation effect reflecting the appreciation of the US dollar against other major international currencies and Indian rupee resulted in a decline in India’s external debt by US $ 13.4 billion. This implies that excluding the valuation effects, the stock of external debt as at end-March 2009 would have increased by US $ 18.7 billion over the level at end-March 2008.

3. Components of External Debt

(i) By way of composition of external debt, the share of commercial borrowings was the highest at 27.3 per cent as at end-March 2009 followed by short-term debt (21.5 per cent), NRI deposits (18.1 per cent) and multilateral debt (17.2 per cent) (Table 2).
(ii) The long-term debt at US$ 180.5 billion and short-term debt at US$ 49.4 billion accounted for 78.5 per cent and 21.5 per cent, respectively, of the total external debt as at end-March 2009.

(iii) The rise in external debt stock was mainly due to the increase in trade credits which rose by US$ 4.2 billion over its level at end-March 2008.

(iv) The short-term debt increased by US$ 2.4 billion as at end-March 2009 mainly on account of rise in short-term trade credits (Table 3 and Chart 2).

(v) Outstanding NRI deposits at US $ 41.6 billion as at end-March 2009 declined by US $ 2.1 billion over the level at end-March 2008 mainly due to valuation effects as there was positive inflows under NRI deposits during 2008-09.

(vi) The level of approvals of ECBs during 2008-09 (April-March) was significantly lower at US$ 18.4 billion as compared to US$ 31.0 billion during 2007-08. As a result, gross disbursements for 2008-09 were lower at US $ 13.4 billion than that of US$ 28.8 billion during the previous year (Table 4).

4. Currency Composition

(i) The currency composition of India’s external debt is generally disseminated in terms of major foreign currencies such as US dollar, Japanese Yen, Euro, Pound Sterling, Special Drawing Rights (SDR) and the domestic currency i.e., Indian Rupee.

(ii) The US dollar continues to be the dominant currency accounting for 57.1 per cent of the total external debt stock as at end-March 2009, followed by the Japanese yen (14.2  per cent), Indian rupee (13.2 per cent) and SDR (9.2 per cent) (Table 5 and Chart 3). The share of Euro has been at around 4 per cent in the recent years.

5. Instrument-wise Classification of External Debt

(i) The instrument-wise classification of India’s external debt as at end-March 2009 reveals that ‘loans’ accounted for 51.8 per cent of total debt outstanding as compared to 49.5 per cent as at end-March 2008 (Table 6).

(ii)The group ‘currency and deposits’ and ‘trade credits’ together accounted for 50.6 per cent of the total non-Government debt as at end-March 2009 as against 52.6 per cent as at end-March 2008.

6. Short-term Debt

(i) The short-term debt has become an important component for measuring the liquidity and refinancing risks. In the recent years, efforts have been taken to expand the coverage of short-term external debt. The data on short-term debt now includes suppliers’ credit up to and above 180 days, FII investments in Government debt, investment by foreign central banks and international institutions in Treasury Bills and external liabilities of central banks and commercial banks.

(ii) Short-term debt by original maturity has increased over the period mainly because of the increase in trade related credits due to growing imports. The share of trade related credits in total short-term debt increased from 91.8 per cent as at end-March 2008 to 93.1 per cent as at end-March 2009 (Table 7).

7. External Debt by Residual Maturity

(i) While external debt is generally compiled in terms of original maturity, analysing the external debt, in particular short term debt in terms of residual maturity is important from the point of view of foreign exchange liquidity management and to ascertain the total foreign exchange outgo on account of debt service payments in the immediate future.

(ii) The ‘short-term debt by residual maturity’ comprises the repayments due under medium and long-term debt by original maturity during one year reference period along with the short-term debt with original maturity. The balance constitutes the long-term debt by residual maturity. Based on residual maturity, the short-term debt accounted for 40.6 per cent of total external debt as at end-March 2009. The ratio of short-term debt by residual maturity to foreign exchange reserves worked out to 37.0 per cent at end-March 2009 (Table 8).

8. Government and Non-Government External Debt

(i) Government (Sovereign) external debt stood at US$ 54.9 billion as at end-March 2009 while non-Government debt amounted to US $ 175.0 billion.

(ii) The share of non-Government debt in total external debt has increased steadily since March 2003. This trend continued during 2008-09 as the share of non-Government debt in total external debt increased further to 76.1 per cent as at end-March 2009 as against 74.6 per cent as at end-March 2008 (Table 9 and Chart 4).

9. Debt Service Payments

(i) India’s debt service payments amounted to US $ 15.4 billion during 2008-09 (April-March) as compared to US $14.9 billion during 2007-08 (April-March) (Table 10).

(ii) India’s debt service ratio¹ has improved progressively over the years owing to the combined effect of moderation in debt service payments and growth in external current receipts. The debt service ratio had declined from a peak of 35.3 per cent in 1990-91 to 5.9 per cent in 2004-05 but increased to 10.1 per cent during 2005-06 due to repayments relating to the India Millennium Deposits. The debt service ratio declined to 4.6 per cent during 2008-09.

(iii) Servicing of External Commercial Borrowings (including principal and interest payments) accounted for 67.4 per cent of the total debt service during 2008-09.

(vi) At end-March 2009, the projected debt service payments for External Commercial Borrowings (ECBs) and Foreign Currency Convertible Bonds (FCCBs) revealed that the principal repayments between 2011-12 and 2012-13 would be higher (Table 11). Despite consolidation of high cost loans and lower interest rates on the current borrowings, interest payments would also increase during these years due to higher disbursement. The projections do not include future debt service obligations arising out of fresh borrowings.

10. Sustainability of India’s External Debt

(i) An assessment of sustainability of external debt is generally undertaken based on the trends in certain key ratios such as debt to GDP ratio, debt service ratio, short-term debt to total debt and total debt to foreign exchange reserves. India has managed its external debt successfully as reflected in the perceptible improvement in various external debt sustainability indicators (Table 12).

(ii)  The ratio of external debt to GDP increased to 22.0 per cent as at end-March 2009 from 19.0 per cent as at end-March 2008.

(iii) The debt service ratio has declined steadily over the years, and stood at 4.6 percent as at end-March 2009.

(iv) India’s foreign exchange reserves provided a cover of 109.6 per cent to the external debt stock at the end of March 2009 as compared to 137.9 per cent as at end-March 2008 (Chart 5).

(v) The share of concessional debt in total external debt declined to 18.2 per cent as at end-March 2009 from 19.7 per cent at end-March 2008 reflecting the continuing increase in non-concessional private debt in India's external debt stock.

(vi) The ratio of short-term debt to foreign exchange reserves at 19.6 per cent as at end-March 2009 was higher than that of 15.2 per cent in the previous year.

(vii) The share of short-term debt in total debt increased to 21.5 per cent at end-March 2009 from 20.9 per cent at end-March 2008.

11. Cross Country Comparison

(i) According to the latest data available on Global Development Finance Online Database, World Bank, the international comparison of external debt of the twenty most indebted countries indicates that India was the fifth most indebted country in 2007  as compared with third position in 1990 (Table 13).

(ii) The element of concessionality in India’s external debt portfolio was the third highest after Indonesia and Philippines.

(iii) India’s debt service ratio was third lowest with China and Malaysia having first and second lowest debt service ratio, respectively.

(iv) In terms of ratio of external debt to Gross National Income (GNI), India’s position was sixth lowest, with China having the lowest ratio of external debt to GNP.

(v) India’s position with respect to short-term debt to total external debt was eighth lowest with Mexico having the lowest ratio of short-term debt to total external debt.

(vi) In terms of reserves to total debt, India’s position was fourth as China, Malaysia and Thailand had higher reserves to debt ratio than India.

(vii) The Quarterly External Debt (QEDS) database, jointly developed by the World Bank and the International Monetary Fund, brings out detailed external debt data of countries that are subscribing to IMF’s Special Data Dissemination Standard/ General Data Dissemination System. The position in respect of the reporting countries for the third and fourth quarters of the calendar year 2008, which has been published by the World Bank (http://go.worldbank.org/6V603CE490) is given at Annex I.