According to the finance ministry, India’s external debt, which increased by 8.2% annually to USD 620.7 billion as of March 2022, is manageable. According to the status report on India’s external debt published by the ministry, rupee-denominated debt, estimated at 31.2% of it, was the second highest, with 53.2% of it being in US dollars.
“India’s external debt continues to be sustainable and prudently managed. As of end-March 2022, it stood at USD 620.7 billion, growing by 8.2 per cent over the level a year ago. External debt as a ratio to GDP was 19.9 per cent, while reserves to external debt ratio were 97.8 per cent,” it said.
As of the end of March 2022, the ratio of foreign currency reserves to external debt was 97.8 percent, down from 100.6 percent a year earlier.
According to the research, the long-term debt, estimated at USD 499.1 billion, made up the majority of the overall debt, or 80.4%, while the short-term debt, estimated at USD 121.7 billion, made up 19.6% of the total. The majority of the short-term trade credit (96%), which was used to finance imports, was in the form of trade credit.
Because of the additional Special Drawing Rights (SDR) that the International Monetary Fund (IMF) would be allocating during 2021–2022, the government debt, which now stands at USD 130.7 billion, has increased by 17.1% over the previous year. It added that the three largest components of the non-sovereign debt, accounting for up to 95.2% of it, are commercial borrowings, NRI deposits, and short-term trade credit. The non-sovereign debt, on the other hand, increased 6.1% to USD 490.0 billion above the level as of end-March 2021.
NRI deposits fell by 2% to USD 139.0 billion, but commercial borrowings increased by 5.7% to USD 209.71 billion and short-term trade credit increased by 20.5% to USD 117.4 billion, the report stated.
The report said the debt service ratio notably decreased to 5.2% during 2021–22 from 8.2% the year before, demonstrating strong current receipts and reducing foreign debt service payments, noting that the indications of debt vulnerability remained benign. According to the report, the debt service payment obligations resulting from the stock of external debt as of end-March 2022 are expected to decrease during the ensuing years. It also noted that India’s external debt is relatively low when seen from a cross-country perspective. According to numerous debt vulnerability measures, India’s sustainability was superior to many Low-and Middle-Income Countries (LMICs) both individually and as a group, according to the report.