India’s $624.7 billion foreign debt is manageable: Nirmala Sitharaman
She noted that while short-term debt, which makes up 20.6% of all external borrowing, is primarily used to finance imports, long-term debt made up 79.4% of the total.
According to Finance Minister Nirmala Sitharaman, India’s external debt, worth $624.7 billion in March 2023 with a debt-service ratio of 5.3%, is manageable and small from a global standpoint.
The ratio of external debt to GDP decreased from 20% to 18.9% at the end of March 2022-2023, according to the study that was released earlier this month, according to Ms. Sitharaman’s prologue to “India’s External Debt: A Status Report 2022-23”.
She noted that while short-term debt, which makes up 20.6% of all external borrowing, is primarily used to finance imports, long-term debt made up 79.4% of the total. This increases the stability of the total external debt.
Nirmala Sitharaman statement-
“From a cross-country perspective, India’s external debt position is better than most of the low and middle-income countries (LMICs) as measured by select vulnerability indicators, such as share of short-term debt in total external debt, external debt to GNI (Gross National Income), forex reserves to external debt and external debt to exports,” Sitharaman stated.
The debt-service ratio increased marginally from 5.2% to 5.3% in 2022–2023, said the report, mostly due to an increase in debt service payments from $41.6 billion to $49.2 billion in 2022–2023.
The amount of foreign exchange reserves needed to balance principal and interest payments on the stock of foreign debt is shown by the debt-service ratio, which compares gross debt service payments (principal and interest combined) to external current receipts.
The increase in gross external debt service payments for the years 2022–2023 was caused, in part, by an increase in debt service payments under commercial borrowings, including those from multilateral and bilateral sources (16.7%), external assistance (17.2%), and an increase under NRI deposits (31.7%), according to the report.
As of March 31, 2023, India had an external debt balance of $624.7 billion, which is a 0.9% or $5.6 billion increase from the previous year. At March 31, 2023, foreign exchange reserves would have covered 92.6% of the external debt.
As of March 2023, the US dollar continued to represent the largest unit of account, making up 54.6% of all external debt. It was followed by the Indian rupee (29.8%), SDRs (6.1%), Japanese yen (5.7%), and euro (3.2%).
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