India's external debt prudently managed despite Covid-19: FM Nirmala Sitharaman

India's external debt continues to be sustainable and prudently managed despite the Covid-19 pandemic, Finance Minister Nirmala Sitharaman said in a foreword to a status report released on 28th September 2021. The report put the total external liability at $570 billions at the end of March, up 2.1% year-on-year.

The Finance Minister pointed out that the salient debt indicators such as external debt as a ratio to GDP at 21.1%, debt service ratio at 8.2%, and foreign exchange reserves to external debt ratio at 101.2% are in a zone of comfort, out of which the long-term debt constitutes the most. Other than the loans with regard to Covid-19 and NRI deposits, a weaker US dollar is the one that contributed to an increase in the foreign debt level at March-end.

The depreciation of the US dollar at March-end over the year-ago level led to a total valuation loss of $6.8 billion. Excluding the loss, the increase in India's foreign debt would have been lower, at $4.7 billion, instead of $11.5 billion. India's external debt position compares well from an inter-country perspective. This testifies to the prudently calibrated external debt policy pursued by the government, said the Finance Minister. India figures among the top five low- and middle-income countries. India's debt service ratio rose to 8.2% in 2020-21 from 6.6% in the previous year, mainly on account of lower current receipts and debt restructuring or debt reorganization undertaken by leading Indian non-financial corporations.

Source: Economic Times