The external debt of the country reached $486.6 bn as on March end 2016. According to the verification of the trend by the government on the basis of the Report published by the RBI, the external debt of the country increased by $10.6 bn compared to a year ago.
NRI Deposits drives external debt
Unlike in the past, debt was driven by NRI deposits. The share of NRI deposits increased to 25.1% though commercial borrowings continue to be the major component of external debt with 37.3% share. According to the data, NRI deposits increased from $115 bn to $127 bn during the year. on the other hand, ECBs increased to $ 181.3 bn from $180.6 bn.
A positive development about the debt scenario is the slowly declining short term debt. It was $ 91.7 in March 2014, declined to $85.5 in March 2015 and again fell to $83.4 bn. The declining share of short term debt is desirable as it reduces the liquidity problem related with debt servicing. Share of short term debt is now 17.2% compared to 23.6% in 2013.
In the total debt the share of government debt continues to be small at 19.2%, highlighting that India’s external debt is incurred more by the corporate. The debt GDP ratio for the country is nearly stagnant at around 23.7% during the last three years.