28th edition of Status Report on India’s External Debt 2021-22 released

Source: The post is based on the article “28th edition of Status Report on India’s External Debt 2021-22 released” published in PIB on 5st September 2022

What is the News?

External Debt Management Unit(EDMU) in the Department of Economic Affairs, Ministry of Finance has released the 28th edition of the Status Report on India’s External Debt 2021-22.

What are the key highlights from the report?

India’s external debt rose by 8.2% to stand at $620.7 billion on March 31, 2022 compared to $573.7 billion on March 31, 2021.

– Out of total external debt, 53.2% of external debt was denominated in US dollars. Indian rupee-denominated external debt was estimated at 31.2% and was the second largest.

– The long-term debt estimated at $499.1 billion formed the largest chunk (80.4%) of the total external debt amount while the short-term debt, at $121.7 billion accounted for 19.6%.

– Commercial borrowings, NRIs deposits, short-term trade credit and multilateral loans accounted for around 90% of the total external debt.

External debt as a ratio to GDP fell marginally to 19.9% as of March 2022 compared to 21.2% of the year-ago period. 

Foreign currency reserves as a ratio to external debt stood slightly lower at 97.8% as of March 2022, compared to 100.6% of the year-ago period.

Sovereign External Debt: As of March 2022, sovereign external debt(SED) increased by 17.1% over the level a year ago reflecting the additional allocation of SDRs by the IMF during 2021-22.

FPIs: Foreign Portfolio Investors(FPIs) holding Government Securities(G-Sec) slid to the US $19.5 billion from US$ 20.4 billion a year ago.  

Non-sovereign external debt estimated at US$ 490.0 billion as of March 2022 posted a growth of 6.1% over last year.CBs, NRI deposits and short-term trade credit accounted for about 95% of non-sovereign debt.

Debt Service Ratio: The debt service ratio fell to 5.2% during 2021-22 from 8.2% during 2020-21 due to buoyancy in current receipts and a decline in debt service payments.

Is India’s external debt position at risk?

India’s external debt continues to be sustainable and prudently managed. From a cross-country perspective, India’s external debt is modest, occupying the 23rd position globally. 

In terms of various debt vulnerability indicators, India’s sustainability was better than the Low-and-Middle Income Countries (LMICs) as a group and vis-à-vis many of them individually.