India’s external debt of $624.7 billion is controllable: Nirmala Sitharaman

India’s external debt of$624.7 billion is manageable and moderate when seen globally, Hindustan Times cited Finance Minster Nirmala Sitharaman as saying.

In the preface to "India's External Debt: A Status Report 2022-23",which was published earlier this month, Sitharaman noted that the ratio of external debt to GDP has decreased from 20 per cent at March 2022-23's end to 18.9 per cent.

The short-term debt, which accounts for 20.6 per cent of the total foreign borrowing and is primarily used to finance imports, made up the remaining 79.4 per cent of the total external debt, adding to its stability, she said.

“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), foreign exchange reserves to external debt and external debt to exports,” Hindustan Times quoted Sitharaman as saying.

According to the report, the debt service ratio for 2022–23 climbed slightly to 5.3 per cent from 5.2 per cent the year before, mostly as a result of an increase in debt service payments from $41.6 billion in 2021–22 to $49.2 billion in 2022–23.

The ratio of gross debt service payments, both principle and interest, to external current receipts, also known as the “debt service ratio”, shows how much foreign exchange reserves are used to offset principal and interest payments on the stock of foreign debt.

The report indicated that, an increase in debt service payments under commercial borrowings, including those from multilateral and bilateral sources (16.7 per cent), external assistance (17.2 per cent), and an increase under NRI deposits (31.7 per cent), together had an impact on the increase in gross external debt service payments from 2022 to 2023.

At $624.7 billion as of March 31, 2023, India's external debt is just 0.9 per cent (or $5.6 billion) greater than it was the previous year. As of March 31st 2023, foreign exchange reserves would have covered 92.6 per cent of the external debt.

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