India's external debt grew by nearly 23 per cent during 2006-07, mainly due to an increase in overseas borrowing by Indian companies and strengthening of the rupee, a finance ministry report said on Monday.
India's external debt stock stood at $155.0 billion on March 31, 2007, accounting for 16.4 per cent of the Gross Domestic Product (GDP) – a rise in debt accumulation of $28.5 billion during the year that represented an increase of 22.6 per cent.
Almost 10 per cent of the addition in total external debt during the year was ascribed to a valuation change as a result of the weakening US dollar vis-à-vis other major international currencies, according to India's External Debt: A Status Report released by the finance ministry.
In terms of rupees, India's external debt at the end of March, 2007 stood at Rs 675,857 crore. Component-wise, as much as 56 per cent of the increase was accounted for by commercial borrowings, followed by Non-Resident Indian (NRI) deposits (16 per cent), short-term debt (12 per cent) and multilateral debt (11 per cent).
Sovereign debt at $48.6 billion at end-March 2007 accounted for around 31.4 per cent of total external debt stock and 5.3 per cent in relation to the GDP.
While the total external debt stock rose during the year, the movement in critical external debt indicators showed a mixed trend. Debt service ratio declined from 9.9 per cent during 2005-06 to 4.8 per cent during 2006-07.
The foreign exchange reserves accounted for a cover of as much as 129 per cent to the total external debt stock.
However, other indicators, such as debt to GDP ratio rose, though marginally, to 16.4 per cent, short-term debt to GDP ratio to 1.3 per cent, short-term debt to total debt to 7.7 per cent, and short-term debt to foreign exchange assets to 6.2 per cent.
According to the latest Global Development Finance, 2007 of the World Bank, which contains data for 2005, the ratio of external debt to Gross National Income was the second lowest for India after that for China.
The concessional loan component in India's debt portfolio was the highest among the top ten indebted developing countries. Likewise, the ratio of short-term debt to foreign exchange reserves was the lowest for India and the share of short-term debt in total debt was the second lowest. India accumulated the least amount of external debt between 1990 and 2005.