With India’s corporate sector resorting to heavy external commercial borrowing country’s external debt ballooned to more than $200 billion by the end of 2007 thus raising the need for effective management of country’s balance of payment position.

The finance ministry statement said India’s external debt at the end of December 2007 stood at $201.4 billion (Rs 794,017 crore), latest data released here show.  As compared to the level of $169.7 billion at end-March 2007, India’s external debt at end-December 2007 increased by $31.8 billion.  Valuation change, due to the depreciation of US dollar vis-a-vis major international currencies and Indian rupees, accounted for $1.1 billion of the increase during the quarter (October to December, 2007) and $6 billion during April-December 2007. 

Rise in borrowings

The increase in external debt was mainly brought about by commercial borrowing and short-term debt.  Analysis of data shows that based on original maturity, long-term debt accounted for 82.6 per cent and short-term debt comprised 17.4 per cent.  Long-term debt rose by $6.3 billion to $166.2 billion and short-term debt by $4 billion to $35.2 billion over the quarter.  Amongst the components of long-term debt, commercial borrowing increased by $4.9 billion (9.4 per cent) to $57 billion.

While NRI deposits declined by 1.5 per cent ($0.6 billion) to $43 billion, multilateral debt, bilateral debt and export credit increased marginally to reach $37.9 billion, $17.3 billion and $8.9 billion, respectively, at end-December 2007. 

Rupee debt continued to remain around the level of $2 billion.  Under short-term debt, while trade related credits rose by around $4 billion, Foreign Institutional Investor (FII) debt investment in government papers rose by $262 million over the quarter.  

Residual maturity

Based on residual maturity, long-term debt accounted for 64 per cent of total debt at end-December 2007.   Short-term debt by residual maturity, consisting of principal repayments due during a one-year reference period under medium and long-term loans, and short-term debt with original maturity of one year or less, accounted for 36 per cent of the total external debt.  The share of government debt in total external debt stood at 26.3 per cent ($53 billion).