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Trade credits, loans major external liabilities for India

business Updated: Jan 01, 2008 22:35 IST
Gaurav Choudhury

Trade credits, loans, currency and deposits constitute the largest chunk of India's external financial liabilities, latest data released by the Reserve Bank of India (RBI) showed.

As at end-June 2007, the country's external financial liabilities to the tune of 45.2 per cent were in the form of other investments ie trade credits, loans, currency & deposits and other liabilities, followed by portfolio investment at 29.0 per cent and direct investment at 25.8 per cent.

Further, 'loan' and 'currency & deposits' had 26.7 per cent and 13.6 per cent share respectively in the total external financial liabilities of the country, whereas trade credit accounted for 4.6 per cent at end-June 2007, the RBI's latest data on India's International Investment Position (IIP) showed.

The International Investment Position (IIP), compiled at the end of a specific period such as end-March, is the statement of the stock of external financial assets and liabilities of a country.

The financial assets consist of the country's financial claims on non-residents and financial liabilities consist of the country's financial liabilities to non-residents.

These transactions are classified according to institutional resident sectors, namely, monetary authority, government, banks, and other sectors including corporate sector.

The net international investment position (the stock of external financial assets less the stock of external financial liabilities) shows the difference between what an economy owns in relation to what it owes.

The net IIP (assets - liabilities) of India had resulted in net claims of non-residents to India, which increased by $15.50 billion to $62.45 billion in end-June 2007 from a level of $46.95 billion in end-March 2007, due to large capital inflows, including external commercial loans.

Among the external financial assets, reserve assets had registered an increase of $14.17 billion as at end-June 2007 over the end-March 2007, followed by direct investment abroad, which witnessed an increase of $5.42 billion during the same period.