India among emerging economies becoming exposed to external shocks, says Moody’s

KOLKATA: Emerging market economies including India are becoming more vulnerable to shocks with piling up of external debts, Moody's Investors Service said in a report.

India with $474 billion in external debt as of 2015 has experienced the second largest rise since 2010. Its external debt to GDP ratio has risen to 23% from 17% in 2005, although is still one of the lowest globally.

External debt for emerging economies has almost tripled in the last decade. It has generally grown faster than GDP and foreign exchange reserves over the last five years. As a result, the average emerging markets external debt to GDP ratio increased to 54% in 2015 from its decade-low of 40% in 2008. The average external debt to reserves ratio rose to 353% in 2015 from 251% in 2007. Moody’s said.


The growth in debt was the highest in the Asia Pacific region, with the largest rise in external borrowing in China, India, Indonesia, Taiwan and Malaysia. While China's external debt to GDP ratio is still the second-lowest globally at 13% of GDP in 2015, the average external debt to GDP ratio for Asia as a whole has recently rose to 47% in 2015 from 31% in 2008.

This was however well below the 78% of emerging Europe, but comparable to the 48% in Latin America and the 43% in the Middle East and Africa region.

Asia-Pacific regional debt has grown the strongest in the last decade, at an average rate of 13.5% a year, the report mentioned. The Asia Pacific region’s rise in debt -- of $1.4 trillion over the last five years -- represents almost 60% of the total increase in emerging market debt over that period.