FM: External debt-service ratio within comfort zone


India’s external debt

of $624.7 billion at March-end 2023 with a

debt-service ratio

of 5.3% is within the comfort zone and modest from a cross-country perspective, FM Nirmala Sitharaman said in her foreword to ‘India’s External Debt: A Status Report 2022-23’ released earlier this month. She said the ratio of external debt to GDP declined to 18.9% at March-end 2022-23 from 20% a year ago.

long-term debt

constituted 79.4% of total external debt, while short-term debt – which is 20.6% of the total external borrowing – is basically incurred to finance imports, enhancing the stability aspects of the total external debt, she said. “India’s external debt position is better than most of the low and middle-income countries as measured by select vulnerability indicators,” the minister noted.
The report said the debt service ratio during 2022-23 has increased marginally to 5.3% from 5.2% in the previous year, mainly due to a rise in debt service payments to $49.2 billion in 2022-23 from $41.6 billion in 2021-22. The ratio is measured by the proportion of gross debt service payments to external current receipts, which indicates the extent of pre-emption of forex reserves for the purposes of repayment of principal and interest out of the stock of foreign debt.

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