India's external debt jumps over 30 per cent to $221 billion in 2007-08 news
04 September 2008

Mumbai: India's external debt as of end-March 2008 stood at $221.2 billion (Rs884,516 crore), showing an increase of 30.4 per cent over the previous year, mainly due to weakening of the US dollar vis-à-vis other major international currencies.

The changes in valuation accounted for almost 20 per cent of the increment in total external debt during the year, according to official data.

In terms of rupees, the increase in the country's external debt during 2007-08 was lower at 19.6 per cent due to the appreciation of the domestic currency essentially against the US dollar. The escalation in external debt during the year could be ascribed mainly to rise in external commercial borrowings (39.5 per cent) and short-term debt (34.8 per cent).

Between end-March 2007 and end-March 2008, government debt as a proportion of total external debt declined from 28.4 per cent to 25.6 per cent and as a percentage of GDP, it dropped from 5.3 per cent to 4.8 per cent.

External debt includes money that the Government of India owes to creditors outside the country, including other governments, global financial institutions like the World Bank, corporations and even private households.

The finance ministry release, however, said all the major solvency and liquidity indicators of external debt continued to remain in the comfort zone: the foreign exchange reserve with the Reserve Bank of India continued to be high, up 117.4 per cent during 2006-07 and up 140 per cent during the next fiscal, a statement issued by the finance ministry said.

Debt service ratio remained low at 5.4 per cent during 2007-08, though this was marginally higher by 0.6 percentage points over the previous year; other indicators, such as the ratio of external debt to gross domestic product, which measures the burden of external debt, was 18.8 per cent during 2007-08.

The ratio of short-term debt to foreign exchange reserves stood at 14.3 per cent  and the ratio of short-term debt to total external debt was 20 per cent as of end-March 2008.

The country's foreign exchange reserves, including currencies and gold, stood at $297.28 billion as of 22 August.

A cross-country comparison based on the data given in World Bank's 'Global Development Finance, 2008' shows that India's position among the top ten debtor countries of the developing world was fifth in 2006 in terms of the stock of external debt. India's debt service ratio was the second best after that of China. The element of concessionality in India's external debt portfolio was the second highest after that of Indonesia.

The report, `India's External Debt: A Status Report, 2007-2008', has tried to improve the scope and reporting of the debt numbers (especially that of short-term external debt) to make data more comprehensive.

The Department of Economic Affairs under the finance ministry has been publishing the report on a regular basis since 1993. The current volume of the report, the fourteenth in the series, brings out developments in India's external debt during 2007-08. It also provides time series data and an analytical presentation of India's external debt statistics since 1990.


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India's external debt jumps over 30 per cent to $221 billion in 2007-08