India will have to pay ₹68,500 crore extra to repay debt due to weak rupee

India’s short-term debt obligations, which included non-resident deposits as well as overseas commercial borrowings by companies, totaled $217.6 billion in 2017.

Oil isn’t the only headache for India as the rupee slides.

The rupee fell past 72 per dollar to a record low on Thursday, amid a deepening emerging market contagion and the risk of a wider current-account deficit (REUTERS File Photo)

Add external debt to the list. With the currency losing more than 11% to the dollar this year, the country will have to shell out an extra ₹68500 crore ($9.5 billion) when repaying short-term debt in the coming months, according to numbers arrived at by the State Bank of India.

The rupee fell past 72 per dollar to a record low on Thursday, amid a deepening emerging market contagion and the risk of a wider current-account deficit. If the rupee averages 73 to a dollar this year and crude oil, India’s biggest import, averages $76 a barrel for the remaining half of 2018, that could see the country’s oil bill rise by ₹457 billion, Soumya Kanti Ghosh, chief economic adviser at the State Bank, wrote in a note Thursday.

India’s short-term debt obligations, which included non-resident deposits as well as overseas commercial borrowings by companies, totaled $217.6 billion in 2017. Assuming 50% has either been paid in the first half of 2018 or was rolled over to next year, the remaining amount to be repaid in rupees would be ₹7.1 trillion computed using the average exchange rate of 65.1 per dollar in 2017.

Here are other risks Ghosh listed:

- Increasing bond yields could add to the government’s fiscal costs, which is estimated at up to 0.7% of gross domestic product

- A 10% depreciation in the rupee could add up to 50 basis points to inflation, as per RBI estimates, besides pushing the oil import bill higher