New Delhi: Despite the COVID-19 pandemic, India’s external debt grew marginally by 2.1% year-on-year to $570 billion by March-end 2021, according to the Finance Ministry.
External debt to GDP ratio increased marginally to 21.1% from 20.6% at the end of March 2020.
According to the status report on India’s external debt released by the ministry, the reserve to external debt ratio rose to 101.2% from 85.6% during the same period, cementing the country’s position as a net creditor to the world.
Government debt rose 6.2% from a year ago to $107.2 billion, driven by an increase in external aid more than offset by a fall in FPI investment in government securities (G-secs).
The increased external assistance reflected the larger disbursement of COVID-19 loans from multilateral agencies during 2020-21.
On the other hand, non-sovereign debt grew 1.2% year-on-year to $462.8 billion.
Commercial lending, NRI deposits and short-term business loans account for 95% of non-sovereign loans.
While NRI deposits grew 8.7% to $141.9 billion, commercial lending at $197.0 billion and short-term business loans at $97.3 billion declined 0.4% and 4.1%, respectively.
In March-end 2021, long-term debt (with an original maturity of more than one year) stood at $468.9 billion, registering an increase of $17.3 billion from the year-ago level.
US dollar-denominated debt remained the largest component of India’s external debt with a share of 52.1% as of March-end 2021, followed by the Indian rupee (33.3%), yen (5.8%), SDR (4.4%) and the euro. The place was (3.5%).
“Over the years, the policy on external debt has enabled the private sector to access external debt in a calibrated manner. By the end of March 2021, the level of non-sovereign debt will be four times that of sovereign debt compared to half. was more. By the end of March 1991,” it said.
Given its relative size, usually in a normal year, it is the relative increase in non-sovereign debt that affects the dynamics of India’s external debt, allowing domestic investments to fund larger investments as the economy expands. Supplements to savings, it said.
In contrast, in the pandemic year, it was the relative increase in sovereign debt, which accounted for a major part in the overall growth of external debt (2.1%), it said, adding that the increase was on account of COVID-19 loans.
On the other hand, within non-sovereign debt, growth-sensitive commercial lending and import-sensitive short-term trade credit shrank. Therefore, the pandemic disrupted the growth-dependent components, although overall external debt levels rose, it added.
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