The Reserve Bank of India (RBI) has released the January 2020 issue of its monthly Bulletin. The central bank examined recent developments in India's external debt profile and external vulnerability indicators. It noted that India's external debt has increased since 2017-18 primarily on account of external commercial borrowings (ECB), non-resident deposits, and short-term trade credit.
As at end-September 2019, India's external debt was placed at US$ 557.5 billion - recording an increase of US$ 14.3 billion (i.e. 2.6%) over its level at end-March 2019. Notwithstanding an increase in absolute value terms, India's external debt has remained at about 20% of GDP since 2017-18. India's foreign exchange reserves have provided adequate cover for external financing requirement [i.e., financing requirement for short-term debt on residual maturity basis and current account deficit] and imports.
India's external vulnerability, hence in terms of reserve adequacy indicators, has remained low in recent years. RBI research noted that empirical analysis suggests the movements in the US dollar against Indian rupee and major currencies influence the size of India's external debt while the impact of current account deficit is not found to be statistically significant.
Powered by Capital Market - Live News
Disclaimer: No Business Standard Journalist was involved in creation of this content
