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New Delhi: According to the Finance Ministry, India’s external debt grew by 2.1 per cent year-on-year to USD 570 billion by March-end 2021, despite the COVID-19 pandemic.
External debt to GDP ratio increased marginally to 21.1 per cent from 20.6 per cent at the end of March 2020.
According to the status report on India’s external debt released by the ministry, the reserve to external debt ratio rose to 101.2 per cent from 85.6 per cent during the same period, cementing the country’s position as a net creditor to the world.
It said government debt of USD 107.2 billion rose by 6.2 per cent from a year-ago level due to an increase in external aid to offset the fall in FPI investment in government securities (G-secs).
The increased external assistance reflected the larger disbursement of COVID-19 loans from multilateral agencies during 2020-21.
On the other hand, non-sovereign debt grew 1.2 percent year-on-year to $462.8 billion.
Commercial borrowings, NRI deposits and short-term business loans account for 95 per cent of non-sovereign debt.
While NRI deposits grew by 8.7 per cent to USD 141.9 billion, commercial borrowings at USD 197.0 billion and short-term trade credit at USD 97.3 billion declined by 0.4 per cent and 4.1 per cent, respectively.
In March-end 2021, long-term debt (with an original maturity of more than one year) stood at USD 468.9 billion, registering an increase of USD 17.3 billion from the year-ago level.
US dollar-denominated debt remained the largest component of India’s external debt with a share of 52.1 per cent as of March-end 2021, followed by the Indian rupee (33.3 per cent), yen (5.8 per cent), SDR (4.4 per cent) . ) and the euro (3.5 percent).
“Over the years, the policy on external debt has enabled the private sector to access external debt in a calibrated manner. By the end of March 2021, the level of non-sovereign debt was more than four times that of sovereign debt, compared to half that at the end of March 1991.
Given its relative size, usually in a normal year, it is the relative increase in non-sovereign debt that affects the dynamics of India’s external debt, allowing domestic investments to fund larger investments as the economy expands. Supplements to savings, it said.
In contrast, in the pandemic year, it was the relative increase in sovereign debt, which accounted for a major part in the overall growth of external debt (2.1 per cent), it said, adding that the increase was on account of COVID-19 debt.
On the other hand, within non-sovereign debt, growth-sensitive commercial lending and import-sensitive short-term trade credit shrank. Therefore, the pandemic disrupted the growth-dependent components, although the overall external debt level increased, it added.
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