India’s external debt increased by $10.5 billion in the April-June 2011 quarter on the back of higher external commercial borrowings and short term debt.
The country’s external debt stood at $317 billion as on June 30, up by 3.4 per cent from $306 million as on March 31, 2011. According to data released by the Reserve Bank of India, half of the external debt constitutes external commercial borrowings and short-term debt.
The share of commercial borrowings in total external debt continued to be the highest at 29.4 per cent at end-June 2011, followed by short-term debt at 21.6 per cent and NRI deposits at 16.7 per cent, multilateral debt at 15.6 per cent and bilateral debt at 8.3 per cent. Rest of the debt includes India’s position at International Monetary Fund, trade credit and rupee debt.
“About 70 per cent of the increase in total external debt during the quarter was on account of commercial borrowings and short-term trade credits broadly reflecting surge in imports,” RBI said.
The external commercial borrowings were up at $4 billion for the month of July during the current financial year as against $1.1 billion during the same period in the previous year. On a sequential basis, external commercial borrowings and short-term debt grew by 4.8 and 5.4 per cent, respectively.
A lot of Indian companies have borrowed overseas and need funds for re-financing these, which has led to the increase in the external debt size.
“In the past few years, foreign borrowings of Indian corporates have not only increased, but have also increasingly become short term in nature. In fact, a large part of these borrowings are due for repayment in 2011-12,” Crisil had said in its report released last week. Dollar denominated debt formed the major chunk of the external liability pie that stood at 54.2 per cent.
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Debt in rupee and yen denominated liabilities took the second and third positions with a share of 19.2 per cent and 11.1 per cent, respectively in the pie.
In terms of maturity, long-term debt stood at $248.5 billion and short-term debt was $68.5 billion. Although, the share of long-term debt was more, in terms of residual maturity short term debt at 43.3 per cent occupied a major portion of the external debt. NRI deposits formed 32 per cent of this short-term debt.
Government’s external borrowing grew by $500 million to $78.7 billion over the previous quarter. Non-governmental borrowing stood at $23.8 billion up by $1 billion during the reporting period.