India's external debt rises 8.2% to $620.7 bn till Mar 2022

India's external debt rose by 8.2 per cent year-on-year to $620.7 billion as of March 2022, which according to the finance ministry is sustainable.

While 53.2 per cent of it was denominated in the US dollar, Indian rupee-denominated debt, estimated at 31.2 per cent, was the second largest, as per the status report on India's external debt released by the ministry.

"India's external debt continues to be sustainable and prudently managed. As of end-March 2022, it stood at $620.7 billion, growing by 8.2 per cent over the level a year ago.

"External debt as a ratio to GDP was 19.9 per cent, while reserves to external debt ratio were 97.8 per cent," it said.

Foreign currency reserves as a ratio to external debt stood slightly lower at 97.8 per cent as of end-March 2022 than 100.6 per cent a year ago.

The report said the long-term debt estimated at $499.1 billion constituted the largest chunk of 80.4 per cent, while the short-term debt at $121.7 billion accounted for 19.6 per cent of the total.

The short-term trade credit was predominantly in the form of trade credit (96 per cent) financing imports.

The sovereign debt at $130.7 billion rose higher by 17.1 per cent over its level a year ago, mainly because of the additional allocation of Special Drawing Rights (SDR) by the International Monetary Fund (IMF) during 2021-22.

The non-sovereign debt, on the other hand, grew 6.1 per cent to $490.0 billion over the level as of end-March 2021, it said, adding commercial borrowings, NRI deposits and short-term trade credit are the three biggest constituents of the non-sovereign debt, accounting for as much as 95.2 per cent.

While NRI deposits declined by 2 per cent to $139.0 billion, commercial borrowings at $209.71 billion and short-term trade credit at $117.4 billion rose by 5.7 per cent and 20.5 per cent, respectively, it said.

Observing that the debt vulnerability indicators continued to be benign, the report said the debt service ratio fell significantly to 5.2 per cent during 2021-22 from 8.2 per cent in the previous year, reflecting buoyant current receipts and moderating external debt service payments.

The debt service payment obligations arising out of the stock of external debt as of end-March 2022 are projected to trend downwards over the coming years, it said, adding that from a cross-country perspective, India's external debt is modest.

In terms of various debt vulnerability indicators, India's sustainability was better than the Low-and Middle-Income Countries (LMICs) as a group and vis-a-vis many of them individually, it said.