September 10th 2023.
Finance Minister Nirmala Sitharaman has said that India's external debt of USD 624.7 billion at March-end 2023 with a debt-service ratio of 5.3 per cent is within the comfort zone and modest from a cross-country perspective. In her foreword to 'India's External Debt: A Status Report 2022-23', she said that the ratio of external debt to GDP declined to 18.9 per cent at March-end 2022-23 from 20 per cent a year ago.
Sitharaman also highlighted that the long-term debt constituted 79.4 per cent of total external debt, while short-term debt, which is 20.6 per cent of the total external borrowing, is basically incurred to finance imports, thus enhancing the stability aspects of the total external debt.
“From a cross-country perspective, India's external debt position is better than most of the Low and Middle-Income Countries as measured by select vulnerability indicators, such as share of short-term debt in total external debt, external debt to GNI , forex reserves to external debt and external debt to exports,” the minister noted.
The report said that the debt service ratio during 2022-23 has increased marginally to 5.3 per cent from 5.2 per cent during the previous year, mainly due to a rise in debt service payments from USD 41.6 billion in 2021-22 to USD 49.2 billion in 2022-23. This 'debt service ratio' is measured by the proportion of 'gross debt service payments' to 'external current receipts', which indicates the extent of pre-emption of forex reserves for the purposes of repayment of principal and interest out of the stock of foreign debt.
The increase in gross external debt service payments during 2022-23 was due to the combined impact of an increase in debt service payments under commercial borrowings, including through multilateral and bilateral sources, external assistance, and an increase under NRI deposits. India's external debt at USD 624.7 billion as of March-end 2023 is marginally higher by 0.9 per cent or USD 5.6 billion over the previous year. Foreign exchange reserves covered 92.6 per cent of the external debt at March-end 2023.
Finance Minister Nirmala Sitharaman has noted that India's external debt position is within the comfort zone and modest from a cross-country perspective. The long-term debt constituted 79.4 per cent of total external debt, with short-term debt being 20.6 per cent. The debt service ratio has also increased marginally to 5.3 per cent, mainly due to a rise in debt service payments and an increase in gross external debt service payments. India's external debt is higher by 0.9 per cent from the previous year, but foreign exchange reserves have covered 92.6 per cent of the external debt. These points indicate that India is in a strong position when it comes to external debt.
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