India’s external debt rose by 2.1 per cent as of March-end 2021, despite the Covid-19 pandemic, the union finance ministry said in a statement. With the increase now, India’s external debt stands at $570 million.
As of March-end 2021, the external debt to GDP ratio rose marginally from 20.6 per cent to 21.1 per cent.
However, the reserves to external debt ratio surged to 101.2 per cent from 85.6% during the same period, consolidating the country’s position as a net creditor to the world, indicated the report on India’s external debt released by the finance ministry.
During 2020-21, India witnessed the augmented external assistance reflecting larger disbursement of COVID-19 loans from multilateral agencies.
By the end of March 2021, long-term debt with an original maturity of over one year was at $468.9 billion, which has recorded a growth of $17.3 billion over a year.
US dollar-denominated debt remained still, in terms of being the most significant component of India’s external debt, with a share of 52.1% during the same period, followed by Indian rupee (33.3%), yen (5.8%), SDR (4.4%) and the euro (3.5%).
As per the report, policy on external debt has enabled the private sector to access foreign debt in a calibrated manner over the years. As of end-March 2021, the level of non-sovereign debt was more than four times that of sovereign debt, compared to half as at end-March 1991.
The non-sovereign debt, on the other hand, grew 1.2% annually to $462.8 billion. NRI deposits, commercial borrowings and short-term trade credit contribute 95% to the non-sovereign debt.
Though NRI deposits rose 8.7 per cent to $141.9 billion, commercial borrowings at $197.0 billion and short-term trade credit at $97.3 billion slipped by 0.4 per cent and 4.1 per cent, respectively.
Looking at the relative size, non-sovereign debt that influences India’s external debt dynamics has a relative rise. It supplements domestic savings to fund larger investments with the expansion of the economy.
As the non-sovereign debt, the growth-sensitive commercial borrowings and import-sensitive short-term trade credit slipped, the pandemic disrupted growth-dependent constituents, with the rise in overall external debt.
The rise in sovereign debt during the Covid-19 pandemic, on the other hand, accounted for a larger share in the overall growth of foreign debt (2.1%), the report suggested, adding the rise was due to the Covid-19 loans.
