Forex reserves cover 89 per cent of external debt

NEW DELHI: India's rising external debt is becoming a concern for the government, especially when its foreign exchange reserves are depleting . The total reserves till the beginning of the fiscal was enough to provide a 100% cover to its external debt.

However, in the nine months to December 2011, the cover that the foreign exchange reserves provided to the total external debt came down to less than 89%. During this period, country's external debt to GDP ratio increased to 20% vis-à-vis 17.8% at March-end 2011. At December-end 2011, India's total external debt was $335 billion, an increase of $29 billion over $306 billion at March-end 2011. "The rise in external debt is largely due to higher commercial borrowings and short-term trade credit," the finance ministry said on Friday.

The share of dollar denominated debt at 57% was the highest in external debt, followed by the rupee 18.6%, Japanese yen 10%, SDR 9% and euro 4%. The long-term debt stood at $257 billion, recording an increase of $15.8 billion over the March-end 2011 level, while short-term debt increased by $13 billion to $ 78 billion.

Short-term debt accounted for 23% of India's total external debt, while the remaining 77% was long-term debt. Component-wise , the share of commercial borrowings stood highest at 30%, followed by NRI deposits 16% and multilateral debt 15%.