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After the BoP crisis of 1991, India’s prudent external debt policies and management with a focus on sustainability, solvency and liquidity have helped contain the increase in size of external debt to a moderate level and it is compositionally better with a longer term maturity profile.
By September 2016, India’s external debt at US$ 484.3 billion, recording a decline of US$ 0.8 billion over the level at end-March 2016—mainly due to reduction in commercial borrowings (i.e., ECBs) and short-term debt, as per the Economic Survey 2016-17. Main features about is composition were as
given below:
• Share of Government (Sovereign) debt was at 20.1 per cent (rest 79.9 per cent being non-Government debt).
• US dollar denominated debt accounted for 55.6 per cent; followed by Indian rupee (30.1 per cent); SDR (5.8 per cent); Japanese Yen (4.8 per cent); Pound Sterling (0.7 per cent); Euro (2.4 per cent) and others (0.6 per cent).
• The maturity pattern indicated dominance of long-term borrowings— long-term debt accounted for 83.2 per cent (rest 16.8 per cent being short-term i.e., of upto one year maturity period).
• Short-term debt (considered risky due to smaller maturity period) fell down by 16.8 per cent during March-September 2016.
• Concessional debt accounted for 9.4 per cent (same as June 2016)— rest (91.6 per cent being commercial debt).
• Forex reserves provided a cover of
76.8 per cent to the debt.
Cross-country comparison of external debt, (as per the World Bank’s International Debt Statistics 2017), indicates that India continues to be among the less vulnerable countries and its key debt indicators compare well with other indebted countries of the developing world.
The prudential external debt management policy of India, over the reform period has led it to keep its external debt within safe and comfortable limits. The Government of India continues to emphasise monitoring of long- and short- term debt, raising sovereign loans on concessional terms with long- term maturities, regulating ECBs (external commercial borrowings) through end-use policy and rationalising interest rates on the NRI deposits.