Data wise: The debt trap

India’s external debt, as on end-March 2010, stood at $261.4 billion (18.9% of the GDP), recording an increase of $36.9 billion or 16.5% over the end-March 2009. The sharp increase could be attributed to an increase in support from IMF to member countries and a jump in commercial borrowings as well as NRI deposits.

There was an improvement in short-term trade credit as well. According to RBI, India continued to be the fifth most indebted country in the world in 2008. External commercial borrowings accounted for 27% of total foreign debt, followed by short-term debt (20%) and NRI deposits (18.4%).

The increase in borrowings resulted in the country’s debt service ratio rising to 5.5% during 2009-10 compared with 4.6% during 2008-09. Excluding the valuation effects due to depreciation of the US dollar against other major international currencies and the Indian rupee, the stock of external debt has increased by $30.4 billion from its level as on end-March 2009.