What is external debt for India?

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What is external debt for India?
External debt which relates to the borrowing of a country is referred more so because the debt instruments floated for the purpose of raising of funds is purchased by foreign investors.

External debt which is constituted by several of the components is accounted and reported by the Ministry of Finance, Government of India and RBI. And as a standard practice, for the March and June quarter, RBI comes up with the statistics while the external debt statistics for the September and December quarter are reported by the Ministry of Finance. And the statistics provided in both rupee and dollar terms is released with a lag of one quarter.

Different constituents of external debt

Short term debt or borrowings: Short term borrowings procured form an integral part of the total external debt of the country. The category includes trade related credits.

External Commercial Borrowings or ECB: It is perhaps reported to be one of the largest component of the total external debt in several of the quarters. But for the quarter ended December 2013, NRI deposits accounted for the largest single component pushing the external debt of the country. The reported surge is on account of the Swap facility extended by the RBI to bring in dollar flows into the country. Know about the external debt of India for the quarter ended December in detail, herein.

Government sovereign external debt: The sovereign external debt is guaranteed by the government and in order to raise it the government issues the currency in a foreign currency which is then sold off to foreign investors. Its important to note that the debt is owed by the government and not the nation as a whole.

Long-term debt or NRI deposits: Deposits by NRIs form the part of long-term deposits.

Other components include bilateral debt, multilateral debtr, rupee debt and export credit.

Representation of external debt currency wise: External debt is also reported in terms of different foreign currencies such as the debt denominated in dollar, Japanese yen, Indian rupee, SDR and euro.

Reasons pushing external debt for India higher:

Both domestic as well as external factors influence an increase in external debt. Among them are incapacity of the nation to source funds to finance its five year plan, reliance of foreign aid for initiating several of the stalled development projects, failure in promoting export activities. Some of the important concerns on the external front giving a push to the external debt are trade restrictions and barriers levied on imports from India by the developed world. Also as the aid provided as grant to the country is a mere sum, India needs to increasing rely on commercial borrowings as well as hard loans.\

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Story first published: Saturday, March 29, 2014, 13:09 [IST]
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