India’s external debt increases 2.1% to $ 570 billion

NEW DELHI: According to the Ministry of Finance, India’s foreign debt rose by 2.1 percent year-on-year to $ 570 billion by the end of March 2021, despite the Covid 19 pandemic.
The foreign debt ratio rose slightly to 21.1 percent from 20.6 percent at the end of March 2020.
However, the reserves-to-foreign debt ratio rose from 85.6 percent to 101.2 percent in the same period, cementing the country’s position as the world’s net creditors, according to the status report on India’s foreign debt published by the ministry.
Government debt of $ 107.2 billion was up 6.2 percent from a year ago, largely due to an increase in external aid that more than offset the decline in FPI government bond (G-Secs) investments, it was said.
The increased external aid reflected a larger disbursement of Covid-19 loans from multilateral agencies in the 2020-21 period.
Non-government debt, on the other hand, rose 1.2 percent annually to $ 462.8 billion.
Commercial borrowing, NRI deposits, and short-term trade loans make up 95 percent of non-government debt.
While NRI deposits grew 8.7 percent to $ 141.9 billion, commercial loans shrank 0.4 percent and $ 197.0 billion and short-term trade loans decreased 0.4 percent and $ 97.3 billion, respectively 4.1 percent.
At the end of March 2021, long-term debt (with an original maturity of over a year) was $ 468.9 billion, up $ 17.3 billion year over year.
Debt denominated in US dollars remained the largest component of India’s foreign debt with a share of 52.1 percent at the end of March 2021, followed by the Indian rupee (33.3 percent), yen (5.8 percent) and SDR (4.4 percent) Percent)) and the euro (3.5 percent).
“Over the years, external debt policy has given the private sector calibrated access to external debt. At the end of March 2021, the amount of non-government debt was more than four times higher than that of the national debt, compared to half as at the end of March 1991, “it said.
Given its relative size, typically in a normal year, it is the relative increase in non-government debt that affects the dynamics of India’s external debt, thereby supplementing domestic savings to fund larger investments as the economy expands, it said.
On the contrary, in the pandemic year, the relative increase in national debt had a larger share in the overall growth in foreign debt (2.1 percent), it said. This increase is due to the Covid-19 loans.
On the other hand, within non-government debt, growth-sensitive commercial loans and import-sensitive short-term trade loans contracted. As a result, the pandemic disrupted growth-related components even though total external debt increased, she added.