Is there a debt crisis in India? Government rejects fear and says ‘responsibility is manageable’: report

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Dismissing apprehensions over India’s external debt, the government said that of the country’s total external liabilities of $620.7 billion, the Center’s share is only $130.8 billion, or 21 % of total debt liabilities, including its Special Drawing Rights (SDR) allocation. , according to an ET report.

“The rumor circulating that the central government is burdened with debt is baseless,” the ET report quoted a source as saying. The source added that more than 40% of the debt is owed to non-financial corporations.

According to the latest RBI data, at the end of March 2022, India’s external debt stood at $620.7 billion, registering an increase of $47.1 billion from its level at the end of March 2021. The external debt to GDP ratio fell to 19.9 percent. cent at the end of March 2022 against 21.2% at the end of March 2021.

“Valuation gains from the appreciation of the US dollar against the Indian rupee and major currencies such as the yen, SDR2 and euro were valued at $11.7 billion. Excluding the valuation effect, the external debt would have increased by $58.8 billion instead of $47.1 billion at the end of March 2022 compared to the end of March 2021”, according to the RBI.

According to the ET report, officials clarified the debt position after concerns over India’s external debt as repayments of $267 billion are due in less than a year. This has raised fears that the repayments could further erode India’s foreign exchange reserves and lead to further currency depreciation.

“This analysis is incomplete, incorrect and misses some basic facts,” the report quoted a source as saying.

While it is true that $267.7 billion in debt is due in less than a year, the Center’s share of that amount is only $7.7 billion or less than 3%, so the level of government debt is quite manageable and stands out safely. , said the report citing officials.

According to the RBI, at the end of March 2022, long-term debt (with original maturity over one year) was placed at $499.1 billion, registering an increase of $26.5 billion from its level of end of March 2021.

The share of short-term debt (with an original maturity less than or equal to one year) in total external debt fell from 17.6% at end-March 2021 to 19.6% at end-March 2022. Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves increased to 20.0% at the end of March 2022 (17.5% at the end of March 2021).

Debt denominated in US dollars remained the main component of India’s external debt, with a share of 53.2% at the end of March 2022, followed by debt denominated in Indian rupee (31.2%), in SDRs (6.6%), in yen (5.4 percent) and euro (2.9 percent). The debt stock of the government and non-government sectors increased in 2021-22.

Debt service (i.e. principal repayments and interest payments) fell to 5.2% of current receipts at end-March 2022, from 8.2% at end-March 2021, reflecting a drop in reimbursements and an increase in current receipts.

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