India’s external debt up 3% at $485.8 bn at end-June

India's external debt increased by 3 per cent in the first quarter of the current fiscal (April-June 2017-18) rising by $13.96 billion to $485.8 billion, data released by the Reserve bank of India (RBI) showed.

The country's external debt increased, primarily on account of an increase in inflow of foreign portfolio investment into the debt segment of the domestic capital market encompassed under commercial borrowings.

The increase in external debt was partly due to valuation loss resulting from the depreciation of the US dollar vis-à-vis the Indian rupee and other major currencies.

The external debt to GDP ratio stood at 20.3 per cent as at end-June 2017, a shade higher than its level of 20.2 per cent at end-March 2017.

Valuation loss due to depreciation of the US dollar vis-à-vis the Indian rupee and other major currencies was placed at $1.72 billion. Excluding the valuation effect, the increase in external debt would have been around $12.24 billion instead of $13.96 billion as at end-June 2017 over the level at end-March 2017.

Commercial borrowings continued to be the largest component of external debt with a share of 37.8 per cent, followed by NRI deposits (24.3 per cent) and short-term trade credit (17.9 per cent).

At end-June 2017, long-term debt was placed at $397.0 billion, recording an increase of $13.1 billion over its level at end-March 2017.

The share of long-term debt in total external debt as at end-June 2017 was 81.7 per cent, marginally higher than its level of 81.4 per cent at end-March 2017.

The share of short-term debt (original maturity) in total external debt decreased to 18.3 per cent at end-June 2017 from 18.6 per cent at end-March 2017. The ratio of short-term debt (original maturity) to foreign exchange reserves decreased to 23.0 per cent as at end-June 2017 (23.8 per cent at end-March 2017).

On a residual maturity basis, short-term debt constituted 41.1 per cent of total external debt at end-June 2017 (41.5 per cent at end-March 2017) and stood at 51.6 per cent of total foreign exchange reserves (52.9 per cent at end-March 2017).

US dollar denominated debt continued to be the largest component of India's external debt with a share of 50.3 per cent as at end-June 2017, followed by the Indian rupee (35.4 per cent), SDR (5.8 per cent), Japanese yen (4.5 per cent) and Euro (3.0 per cent).

The borrower-wise classification of the outstanding external debt shows that the government as well as non-government debt increased at end-June 2017.

Debt service payments declined to 6.3 per cent of current receipts as at end-June 2017 as compared with 8.3 per cent at end-March 2017 - reflecting lower repayments of external commercial borrowings (ECBs).