The External Debt Management Unit (EDMU) in the Department of economic Affairs, Ministry of Finance, has released 28th edition of the Status Report on India’s External Debt 2021-22. India’s external debt, at US$ 620.7 billion as at end-March 2022, grew by 8.2 per cent over US$ 573.7 billon as at end-March 2021. While 53.2 per cent of it was denominated in US dollar, Indian rupee denominated debt, estimated at 31.2 per cent, was the second largest. External debt as a ratio to GDP fell marginally to 19.9 per cent as at end-March 2022 from 21.2 per cent a year ago. Foreign currency reserves as a ratio to external debt stood slightly lower at 97.8 per cent as at end-March 2022 than 100.6 per cent a year ago.
India’s External Debt
The long-term debt estimated at US$ 499.1 billion, constituted the largest chunk of 80.4 per cent, while the short-term debt, at US$ 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. Commercial borrowings (CBs), NRIs deposits, short-term trade credit and multilateral loans together accounted for 90 per cent of the total external debt. While NRI deposits marginally contracted during end-March 2021 and end-March 2022, CBs, short-term trade credit and multilateral loans, on the other hand, expanded during the same period. The rise in CBs, short-term trade credit and multilateral loans together was significantly larger than the contraction in NRI deposits.
Sovereign External Debt :
As at end-March 2022, sovereign external debt (SED) amounted to US$ 130.7 billion, increasing by 17.1 per cent over the level a year ago, reflecting the additional allocation of SDRs by the IMF during 2021-22. SDRs rose to US$ 22.9 billion from US$ 5.5 billion as at end-March 2021. FPI holding of G-Sec, on the other hand, slid to US$ 19.5 billion from US$ 20.4 billion a year ago. Non-sovereign external debt, estimated at US$ 490.0 billion as at end-March 2022, posted a growth of 6.1 per cent over the level a year ago. CBs, NRI deposits, and short-term trade credit accounted for about 95 per cent of non-sovereign debt., The short-term trade credit rose substantially by 20.7 per cent to US$ 117.4 billion as at end-March 2022 on the back of a surge in imports during 2021-22.
Debt Service Ratio:
The debt service ratio fell to 5.2 per cent during 2021-22 from 8.2 per cent during 2020-21 due to buoyancy in current receipts and a decline in debt service payments. The debt service payment obligations arising out of the stock of external debt as at end-March 2022 are projected to trend downwards over the coming years.
In a cross-country perspective, India’s external debt is modest, occupying 23th position globally. 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-à-vis many of them individually.