With currency risk of repayment softening in the wake of a strengthening rupee vis-a-vis the US dollar, corporates merrily borrowed overseas in the first quarter of this fiscal year. External commercial borrowings (ECBs) continue to remain the single largest contributor to India's external debt, and accounted for a whopping 63 per cent of net new debt in the April-June quarter this year, up from 59.2 per cent in the previous quarter.
Loans raised by the private sector from international capital markets with a maturity of more than three years are classified as ECBs.
The Reserve Bank of India (RBI) data on external debt released on Friday showed that India's external debt during the first quarter stood at $165.4 billion, recording an increase of $8.7 billion or 5.6 per cent over the March-end 2007 level.
Indian corporates raised $48.3 billion during the April-June quarter, up 12.9 per cent from the same quarter of the previous year.
"Ongoing technological upgrade and modernisation combined with expansion of domestic industrial activities have led to increased investment demand by Indian companies, which are reflected in an increase of ECBs," the RBI said.
The continuous appreciation of the rupee has sparked off speculation that the government may impose stricter monitoring of end use of ECBS and also possibly lower deposit rates for non-resident Indians.
Finance ministry sources said the opinion within the official circles was that a "very large" proportion of ECBs raised by Indian corporates may still be circumventing the end-use norms.
India's current account deficit during the quarter stood at $4.70 billion, compared with a deficit of $4.57 billion in the same period last year.
The RBI data showed that April-June trade deficit widened to $21.58 billion from $16.95 billion in the corresponding quarter of the previous year. The RBI said the balance of payments surplus in the April-June quarter was $11.2 billion, compared with a surplus of $6.38 billion in April-June 2006.