According to the Finance Ministry, despite the COVID-19 pandemic, India’s external/external debt stood at 2.1 per cent year-on-year to USD 570 billion by the end of March, 2021. India’s external debt ratio increased to 21.1 per cent at the end of March 2021 from 20.6 per cent at the end of March, 2020. However, the external debt ratio increased from 85.6 per cent to 101.2 per cent during the same period. According to the Status Report on India’s External Debt by the Ministry of Finance, India secures its status as a net creditor to the world.
India’s External Debt by the End of March, 2021 – Major Events
At the end of March, 2021, India’s external debt stood at US$ 570 million, an increase of US$ 11.5 billion from the level at the end of March, 2020. India’s external debt to GDP ratio increased from 20.6 per cent at the end of Mar-19 to 21.1 percent at the end of Mar- 2020.
The largest component/share of India’s external debt was a US dollar-led debt with a share of 52.1 per cent at the end of March, 2021, followed by the Indian rupee (33.3 per cent), yen (5.8 per cent), SDR (4.4 per cent). , and the euro (3.5 percent).
India’s sovereign debt by the end of March 2021
Typically, the relative increase in non-sovereign debt affects the dynamics of India’s external debt, thereby supplementing domestic savings to fund large investments, as the economy expands. However, this pandemic year caused a relative increase in sovereign debt, which contributed 2.1 percent to the overall growth of India’s external debt. This increase has been attributed to COVID-19 loans.
The report said that, more than offsetting the decline in foreign portfolio investors (FPIs) in government securities, government debt of USD 107.2 billion, more than offset the decline in external aid, stood at 6.2 per cent from its level at end-March 2020 extended.
India’s non-sovereign debt by the end of March 2021
India’s non-sovereign debt grew 1.2 per cent year-on-year to USD 462.8 billion. 95 per cent of this non-sovereign debt was on account of NRI deposits, commercial borrowings and short-term business loans. NRI deposits grew by 8.7 per cent at US$141.9 billion, short-term trade credit at US$97.3 billion and commercial borrowings at US$197.0 billion declined by 4.1 per cent and 0.4 per cent, respectively.
India’s External Debt up to the end of March, 2021 – Summary
Despite the COVID-19 pandemic, India’s external/external debt is managed sustainably and judiciously. Since the depreciation of US Dollar at end-March 2021 was higher than the level at end-March 2020, there was a valuation loss of US$ 6.8 billion. Excluding these valuation losses, India’s external debt would have been US$ 4.7 billion instead of US$ 11.5 billion. A weak US dollar, COVID-19 debt and NRI deposits have mostly contributed to the growth of India’s external debt till the end of March, 2021.
This loan-What is GDP Ratio?
The debt-to-GDP (Debt-to-GDP) ratio is the ratio between a country’s gross domestic product (GDP) and debt. This ratio indicates the ability of a country to repay its debt. A country with a low debt-to-GDP ratio indicates that, while being able to produce and sell goods, it is able to repay its debt without any further debt.