External debt of India

The external debt of India is the total debt the country owes to foreign creditors. The debtors can be the Union government, state governments, corporations or citizens of India. The debt includes money owed to private commercial banks, foreign governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank.

India's external debt data is published quarterly, with a lag of one quarter. Statistics for the first two quarters of the calendar year are compiled and published by the Reserve Bank of India. Data for the last two quarters is compiled and published by the Ministry of Finance. The Government of India also publishes an annual status report on the debt which contains detailed statistical analysis of the country's external debt position.[1]

India’s external debt was US$ 556.2 billion at the end of September 2020. It recorded a marginal increase of US$ 1.5 billion over its level at end of June 2020. The external debt to GDP ratio decreased to 21.6% at end of September 2020 from 21.8% a quarter ago.

The foreign currency reserves at the end of September 2020 were over US $540 billion[2] hence the foreign currency reserves as a ratio to external debt rose to 97.4% at end of September 2020 from 85.2% at end of March 2020.[3] The foreign currency reserves increased to over US $585 billion by January 2021.


Long-term debt

The composition pattern of India's external debt is noted below. Long-term borrowings (more than a year to maturity) dominate India's external debt. India classifies its long-term external debt into seven heads. The external debt column notes the value of external debt stock outstanding at the end of September 2020. [3]

S. No.Component of Long-term debtDebt (US$ billion) September 2019Debt (US$ billion) September 2020Percentage share September 2020
1Multilateral58.866.912.03%
2Bilateral26.428.35.09%
3IMF loans5.45.61.01%
4Export credit7.67.01.26%
5Commercial borrowings216.2207.337.27%
6NRI deposits132.9137.324.69%
7Rupee debt1.11.00.18%
Total Long-term debt448.5453.481.52%
Total Short-term debt109.1102.818.48%
Total External Debt557.6556.2100%

Multilateral

Multilateral debt is the money India owes to international financial institutions such as the Asian Development Bank (ADB), the International Development Association (IDA), the International Bank for Reconstruction and Development (IBRD), the International Fund for Agricultural Development (IFAD) and others. Borrowing from the International Monetary Fund (IMF) are not included under multilateral debt, and are instead classified separately under the IMF head. As on 30 September 2020, India had a total multilateral debt of $66.9 billion. The country's major creditors are the IDA, ADB, and IBRD. The IFAD and a few other multilateral creditors hold the remaining portion of the multilateral debt.[3]

Bilateral

Bilateral debt is the money India owes to foreign governments. As on 30 September 2020, India had a total bilateral debt of $28.3 billion.[3]

Currency composition

India's external debt is held in multiple currencies, the largest of which is the United States dollar. As on 31 December 2017, 48.2% of the country's debt was held in U.S. dollars. The rest of the debt is held in Indian rupees (37.3%), special drawing rights (5.7%), Japanese yen (4.6%), Euros (3.2%) and other currencies (1%).[4]

Concerns and issues

Moody’s Investors Service upgraded India's government bond rating from Baa3 to Baa2 on 16 November 2017. In the announcement, Moody’s noted that "greater expectation of a sizeable and sustained reduction in the general government debt burden, through increased government revenues combined with a reduction in expenditures, would put positive pressure on the rating."[5]

References
  1. Department of Economic Affairs. "INDIA'S EXTERNAL DEBT AS AT END-DECEMBER 2019".
  2. https://m.rbi.org.in//scripts/WSSViewDetail.aspx?PARAM1=2&TYPE=Section
  3. Department of Economic Affairs. "External Debt for Quarter ending September 2020".
  4. Department of Economic Affairs (March 2018). "INDIA'S EXTERNAL DEBT AS AT END-DECEMBER 2017" (PDF). Ministry of Finance. Retrieved 12 April 2018.
  5. "Moody's upgrades India's government bond rating to Baa2 from Baa3; changes outlook to stable from positive". Moody's.com. 16 November 2017. Retrieved 12 April 2018.
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