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India’s external debt rises by 13% to $345.8 billion in 2011-12 fiscal

30 Jun 2012 Evaluate

Due to higher borrowing and trade credit, the country’s external debt rose by 13 percent to $345.8 billion in the fiscal year 2011-12. As per the data released by the Reserve Bank of India (RBI), at the end of March 2011, the external debt stood at $305.9 billion. By the end of March 2012, India’s external debt reached at $345 billion, which is 20 percent of the GDP, indicating an increase of $39 billion or 13 percent at the end of the same period a year before.

This surge was mainly on the back of significant increase in commercial borrowing, short term trade credit and rupee denominated Non-resident Indian deposits. Further, the large option to borrowings, mainly in short-term nature, reflected widening financing requirements and increasing uncertainty in global financial markets as situation in euro zone continued to be weak.

All the components of the external debt recorded during the year with loan under external assistance increased up by $3 billion during 2011-12 as compared to $8.7 billion a year before. The government borrowing stood at $81.9 billion against $78.1 billion as at end-March 2011. The government debt to that of total external debt was at 23.7 percent at the end of March 2012 lower than that of 25.5 percent at the end of same period last year.

The main components of India’s external debt comprises of US dollar, Japanese yen, euro, pound sterling, special drawing rights (SDR) and the domestic currency rupee with the dollar denominated debt remaining the largest, with 55 percent in the total external debt at the end of March 2012.

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