External debt rises 1.8% to $124.3 bn in H1

India's external debt rose 1.8 per cent to $124.3 billion at the end of September 2005, mainly on account of a $1.3 billion increase in commercial borrowings and a $1 billion rise in short-term debt during June-September.

According to the latest report on external debt released by the finance ministry, short-term debt saw the steepest rise of 14.1 per cent to $8.3 billion at the end of September, as against $ 7.3 billion at the end of June 2005.

The increase was attributed to higher trade credits on account of a steep increase in imports during the current financial year. Export credit rose 1.5 per cent to $5.3 billion at the end of September compared with $5.2 billion in June.

While long-term debt rose 1 per cent to $116 billion at the end of September, as against $114.8 billion this June, it constituted a bulk of India's external debt.

Bilateral debt dropped 2.5 per cent to $15.9 billion during the quarter ended September, as against $16.3 billion in June 2005. Similarly, rupee debt fell 1.2 per cent to $2.12 billion at the end of September, compared with $2.15 billion at the end of June.

Though multilateral debt rose 0.4 per cent to $31.4 billion during the period, it continued to account for 25.3 per cent of India's external debt, followed by commercial borrowings at 22.9 per cent.

The share of concessional debt to total debt fell from 33.3 per cent at the end of June 2005 to 31.6 per cent at the end of September 2005. The share of short-term debt in the total debt was estimated at 6.7 per cent at the end of September, as against 6.1 per cent at the end of the previous quarter.

While the share of dollar and pound sterling increased, the share of other currencies in India's total debt witnessed a drop.

"The external debt management policy of the government continued to focus on raising loans from the least expensive sources with longer maturities, monitoring of short-term debt, keeping commercial debt under manageable limits, encouraging non-debt capital flows and accelerating growth of exports," the report said.

India's foreign exchange reserves were estimated at $143.1 billion. The foreign currency assets of the Reserve Bank of India amounted to $136.9 billion, providing a cover of around 110 per cent of the total external debt.