Time for few lessons in economics
India’s external debt, as at end-March 2012, was placed at US $ 345.8 billion (20.0 per cent of GDP) recording an increase of US $ 39.9 billion or 13.0 per cent over the end-March 2011 level on account of significant increase in commercial borrowings, short-term trade credits, and rupee denominated Non-resident Indian deposits.
Excluding the valuation effects due to appreciation of US dollar primarily against Indian Rupee, the stock of external debt has increased by US$ 51.8 billion over the stock as at end-March 2011.
The share of commercial borrowings stood highest at 30.2 per cent as at end-March 2012 followed by short-term debt (22.6 per cent), NRI deposits (16.9 per cent) and multilateral debt (14.6 per cent).
The short-term debt increased by US$ 13.2 billion on account of rise in short-term trade credits, FII investment in T-bills and commercial banks borrowings.
The debt service ratio increased to 5.6 per cent during 2011-12 as compared to 4.2 per cent during 2010-11.
Based on residual maturity, short-term debt accounted for 42.7 per cent of the total external debt as at end-March 2012. Whereas the share of short-term debt, by original maturity, was 22.6 per cent of the total external debt stock.
SO Commercial borrowing and NRI deposits makes Almost 47 % of borrowing
Now lets see break up of those 20% debt of GDP
Government (Sovereign) external debt stood at US$ 81.9 billion as at end-March 2012 as against US$ 78.1 billion as at end-March 2011. The
share of Government external debt in the total external debt at 23.7 per cent at end-March 2012 was lower than that of 25.5 per cent as at end-March 2011.
The
share of non-Government debt in total external debt increased to 76.3 per cent as at end-March 2012 from 74.5 per cent at end-March 2011
Now what could be those Non Government Debts :-
1) Private Companys borrowing through ECB-------> now Question Arises What this ECB's
An external commercial borrowing (ECB) is an instrument used in India to facilitate the access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers' credit, suppliers' credit, securitised instruments such as floating rate notes and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc.
ECBs cannot be used for investment in stock market or speculation in real estate
The money raised through ECB is cheaper given
near-zero interest rates in the US and Europe, Indian companies can repay their existing expensive loans from that.
Looks like a smart Trade off
Interest rate of borrowing in india is 12% currently whereas US and Europe is near 1-2% ...Naturally Indian companies tries to raise money from this countries in effect raising So called External debt whereas it is actually making profit in this deal
2) NRI deposits :----->
this is pretty simple I deposit money in bank ....i have a credit with bank and banks is in debt to me as they have to pay it back
3) Imports bills:-
OIL---> Can't run country without it , no arguement
GOld ---> Now thats tricky ...India is largest consumer of gold ....So i borrow money to buy Gold its debt but what about the Gold investment made with that debt.....something to think abt till jury is out on gold
NOW many ppl here claim India is heading for 1990 like crisis...let see
1990-1991
External Debt-------------------------------------------------------------------83.8 bl$
Ratio of External Debt to GDP----------------------------------------------------28.7 %
Ratio of Foreign Exchange Reserves to Total Debt---------------------------------7.0
Ratio of Short-Term Debt to Foreign Exchange Reserves (most imp in short term)---146.5
Ratio of Short- Term Debt to Total Debt------------------------------------------10.2
2011-2012
External Debt-------------------------------------------------------------------345.8 bl $
Ratio of External Debt to GDP----------------------------------------------------20.0 %
Ratio of Foreign Exchange Reserves to Total Debt---------------------------------85.1
Ratio of Short-Term Debt to Foreign Exchange Reserves (most imp in short term)---26.6
Ratio of Short- Term Debt to Total Debt------------------------------------------22.6....
Compare in see for urself
Following are figures from sites of RBI
Reserve Bank of India
