India's external debt prudently managed despite Covid-19: FM Nirmala Sitharaman

India's external debt continues to be sustainable and prudently managed despite the Covid-19 pandemic, finance minister Nirmala Sitharaman said in a foreword to a status report released on Wednesday. The report put the total external liability at $570 billion at the end of March, up 2.1% year-on-year.

"Salient debt indicators such as external debt as a ratio to GDP at 21.1%, debt service ratio at 8.2%, and foreign exchange reserves to external debt ratio at 101.2% are in a zone of comfort," said Sitharaman. "The long-term debt constitutes the bulk."

Apart from Covid-19 loans and NRI deposits, a weaker US dollar contributed to the rise in the foreign debt level at March-end, said the report titled 'India's external debt: A status report 2020-21'.

The US dollar depreciated at March-end over the year-ago level, yielding a valuation loss of $6.8 billion. Excluding the loss, the increase in India's foreign debt would have been lower, at $4.7 billion, instead of $11.5 billion.

"India's external debt position compares well from inter-country perspective. This testifies to the prudently calibrated external debt policy pursued by the government," said Sitharaman.

India figures among the top five low- and middle-income countries in terms of reserve cover to total external debt stock.

India's debt service ratio rose to 8.2% in 2020-21 from 6.6% in the previous year, mainly on account of lower current receipts and debt restructuring or debt reorganisation undertaken by leading Indian non-financial corporations.