External debt rises $40 bn in 2011-12

Country's external debt rose by $39.9 billion during the one-year period ending March 2012 to $345.8 billion on account of higher commercial borrowings and rise in non-resident Indian deposit.

India's external debt stock at end-March 2012 stood at $345.8 billion, increasing by $39.9 billion (13.0 per cent), the finance ministry said in a statement.

At the end of March 2011, the external debt, which indicates liability of residents of a country to non-residents, was $305.9 billion.

"The rise could be attributed mainly to increase in commercial borrowings, short-term debt, and non-resident Indian deposits," the statement added.

At the end of March, the share of commercial borrowings in total external debt stock stood at 30.2 per cent, followed by short-term debt (22.6 per cent), NRI deposits (16.9 per cent) and multilateral debt (14.6 per cent).

"Though the rising shares of components namely ECB are in line with the broad policy orientation of the Indian economy (that has emphasised attracting foreign savings into the economy over the past few decades), these developments signal heightened exposure of the domestic corporate sector to external shocks, including adverse exchange rate movements," the statement said.

At end-March 2012, India's short-term external debt stood at $78.1 billion, reflecting an increase of 20.3 per cent over end-March 2011, as the share of FII investment increased.

Trade credits accounted for 83.3 per cent of short-term debt at end-March 2012 as against 90 per cent as at end-March 2011.

India's external debt has remained within manageable limits as indicated by the external debt to GDP ratio of 20 per cent and the debt service ratio of 6 per cent in 2011-12, the statement said.

"A cross country comparison also shows that India continues to be among the less vulnerable countries with its external debt indicators comparing well with other indebted countries," it added.

Photograph: Truth Leem/Reuters