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CONTENTSPage No.

List of Abbreviations (v)

1 Overview 1

2 Classification of External Debt 32.1 Stock of External Debt 32.2 Creditor Classification 42.3 Borrower Classification 72.4 Instrument-wise Classification 82.5 Currency Composition 92.6 Concessional Debt 12

2.7 Summary 12

3 Short-term External Debt 133.1 Introduction 133.2 Indias short-term debt 133.3 Short-term External debt by Original Maturity 133.4 Short-term External debt by Residual Maturity 143.5 Summary 15

4 Debt Service 164.1 Introduction 164.2 Debt Service Payments and Debt Service Ratio 164.3 Terms of Borrowings 204.4 Projections of Debt Service Payments 204.5 Summary 21

5 International Comparison 225.1 Introduction 225.2 External Debt of Developing Countries 22

5.3 Indias External Debt 235.4 Summary 26

6 Sovereign External Debt 276.1 Introduction 276.2 Composition of Sovereign External Debt 276.3 Currency Composition 296.4 Debt Service 306.5 Explicit Contingent Liability 31

6.6 Projections of Debt Service on Government Account 326.7 Central Assistance to State Governments for Externally-aided projects 346.8 Summary 34


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7 Trends and Composition of Indias External Debt: 1990-2010 357.1 Background 357.2 Structure of Indias External Debt 357.3 Select External Debt Indicators 40

7.4 Summary 46

8 Global and Euro Zone Debt Crisis: Perspective and Lessons 478.1 Introduction 478.2 Role of Debt in Global Crisis 478.3 Sovereign Debt and the Euro Zone Crisis 488.4 Indias External Debt and Global Crisis 488.5 Indias Sovereign Debt 48

Box2.1 Rupee Denominated Debt 11

Figures2.1 Creditor Classification of External Debt at end-March 2005 (per cent) 52.2 Creditor Classification of External Debt at end-March 2010 (per cent) 62.3 Share of Long Term Debt of Financial, Public and Private Sectors in

Total Non-Government External Debt (per cent) 82.4 Currency Composition of External Debt at end-March 2005 (per cent) 102.5 Currency Composition of External Debt at end-March 2010 (per cent) 103.1 Components of Short-term Debt at end-March 2010 (per cent) 133.2 Residual Maturity Short-term Debt Indicators (per cent) 154.1 Indias Debt Service Ratio (per cent) 164.2 Indias External Debt Service Payments (US$ billion) 174.3 Composition of Indias External Debt Service Payments 184.4 Projected Debt Service Payments during 2010-11 to 2019-20 215.1 International Comparison of Change in External Debt Stock between

2000 and 2008 (per cent) 235.2 International Comparison of Ratio of Short-term to Total External Debt, 2008 (per cent) 255.3 International Comparison Share of Concessional Debt in

Total External Debt, 2008 266.1 Composition of Sovereign Multilateral Debt at end-March 2010 (per cent) 286.2 Composition of Sovereign Bilateral Debt at end-March 2010 (per cent) 296.3 Currency Composition of Indias Sovereign External Debt

at end-March 2006 (per cent) 306.4 Currency Composition of Indias Sovereign External Debt

at end-March 2010 (per cent) 306.5 Projections of External Debt Service Payments to Multilateral Creditors

(US$ million) 336.6 Projections of External Debt Service Payments to countries (US$ million) 33


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7.1 Trends in Short and Long Term Components of External Debt (US$ Million) 357.2 Composition of Indias Long Term External Debt (per cent of total external debt) 367.3 Government and non-Government Debt as a share of

Total External debt (per cent) 367.4 Composition of Multilateral Debt (per cent) 377.5 Composition of Bilateral Debt (per cent) 377.6 Changing Composition of non-Government External Debt 387.7 Changing Currency Composition of External Debt (per cent) 397.8 Changing Currency Composition of Sovereign External Debt (per cent) 397.9 Indias External Debt to GDP ratio (per cent) 407.10 External Debt to Current Receipts (per cent) 417.11 Ratio of Short-Term to Total External Debt as per old and

new Definitions (per cent) 427.12 Short-term Debt to Foreign Exchange Reserves (per cent) 437.13 Concessional Debt to Total External Debt (per cent) 447.14 Share of Official and Private Creditors in Indias External Debt (per cent) 447.15 Debt Service Ratio (per cent) 457.16 Principal and Interest Repayments (US$ Million) 46

Text Tables1.1 Indias Key External Debt Indicators 22.1 Indias External Debt Stock (2005-10) 32.2 Composition of External debt 42.3 Creditor Classification of External Debt 52.4 Share of Official and Private Creditors in External Debt 62.5 External Debt By Borrower Classification 72.6 Composition of Non-Government External Debt 82.7 Instrument-wise Classification of External Debt at end-March 2010 92.8 Currency Composition of External Debt 92.9 Share of Concessional Debt in Total External Debt 123.1 Short-term Debt by Original Maturity 143.2 Short-term Debt by Residual Maturity 154.1 Indias External Debt Service Payments 164.2 Indias External Debt Service Payments Based on Creditor Category 184.3 Disbursements and Principal Repayments under Short-term Debt 194.4 Implicit Interest Rate on Indias External Debt 204.5 Average terms of new commitments for India 204.6 Projected Debt Service Payments 215.1 External Debt of Developing countries: Key Indicators 225.2 Share of Public and Private Sector in Long-term External Debt of

Developing Counties 235.3 International Comparison of Top Twenty Developing Debtor Countries, 2008 245.4 Present Value based Indicators of Top twenty Developing Debtor Countries, 2008 25


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6.1 Indias Sovereign External Debt 276.2 Currency Composition of Sovereign External Debt 296.3 Sovereign External Debt Service Payments 316.4 Central Government Credit Guarantees on External Debt 326.5 Creditor-wise Projections of External Debt Service Payments

under Government Account 326.6 External Assistance to States (on back to back basis loans) on

Government Account 347.1 Prepayment of Government and Non-Government Credits to

Multilateral and Bilateral Institutions 387.2 Growth Rates of Debt Stock and GDP at Market Prices 407.3 Growth Rates of Debt Stock and External Current Receipts 417.4 Short Term External Debt by Old and New Definitions 42

AnnexI External Debt : Definition, Concepts and Dissemination of Data 50II Key External Debt Indicators (per cent) 53III Indias External Debt Outstanding - Annual ( ` Crore) 54IV Indias External Debt Outstanding -Annual (US$ million) 60V Indias External Debt Outstanding -Quarterly ( ` Crore) 66VI Indias External Debt Outstanding -Quarterly (US$ million) 71VII External Debt by Borrower Categories (US$ million) 76

VIII Instrument-wise classification of long-term external debtoutstanding at end-March 2010 77

IX Currency Composition of Indias External Debt (per cent) 78X Short-term debt by remaining maturity 79XI Indias External Debt Service Payments- Source-wise 80XII Indias External Debt Service Payments- by Creditor Categories 81XIII International Comparison of Top Twenty Developing Debtor

Countries, 2008 82XIV Gross External Debt positions for selected countries (QEDS) 83XV Creditor-wise Sovereign External Debt ( ` Crore) 84XVI Creditor-wise Sovereign External Debt (US$ million) 85XVII Currency Composition of Sovereign External Debt 86XVIII Sovereign External Debt Service Payments (Actual) 87XIX Central Government Credit Guarantees on External Debt 88XX Creditor wise projections of External Debt Service Payments

under Government Account 89XXI Debt service projections of States under External Assistance 90XXII Policy Measures related to External Commercial Borrowings (ECBs) 92

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LIST OF ABBREVIATIONS

AAAD Aid Accounts & Audit DivisionAD Authorised DealersADB Asian Development Bank BoP Balance of PaymentsCDO Collateralised Debt ObligationCDS Credit Default SwapCS-DRMS Commonwealth Secretariat- Debt Recording and Management SystemCUB Committed Undisbursed BalanceDEA Department of Economic AffairsECB External Commercial BorrowingsEDMU External Debt Management UnitEU European UnionFCA Foreign Currency AssetsFCCB Foreign Currency Convertible BondFC(B&O)D Foreign Currency (Banks & Other) DepositFCNR(A) Foreign Currency Non-Resident Account

FCNR(B) Foreign Currency Non-Resident Bank DepositFDI Foreign Direct InvestmentFIIs Foreign Institutional InvestorsFOREX Foreign Exchange ReservesGDF Global Development FinanceGDP Gross Domestic ProductGDR Global Depositry ReceiptsGDDS General Data Dissemination SystemGNI Gross National Income

HDFC Housing Development Finance Corporation Ltd.HUDCO Housing and Urban Development Corporation Ltd.IBRD International Bank for Reconstruction and DevelopmentICICI Industrial Credit and Investment Corporation of IndiaIDA International Development AssociationIFAD International Fund for Agricultural DevelopmentIFCs Infrastructure Finance CompaniesIFC (W) International Finance Corporation (Washington DC)

IMD India Millennium DepositIMF International Monetary FundIPCL Indian Petrochemicals Corporation Ltd.

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LBO Leveraged BuyoutsLIBOR London Inter-Bank Offer RateMOF Ministry of FinanceNBFC Non-Banking Finance CompaniesNRI Non-Resident IndianNR(E)RA Non-Resident (External) Rupee AccountNR (NR) D Non-Resident (Non-Repatriable) Rupee DepositNRO Non-Resident Ordinary AccountNSA Not separately available

OECD Organisation for Economic Cooperation and DevelopmentONGC Oil and Natural Gas CorporationOPEC Organisation of the Petroleum Exporting CountriesPIO Persons of Indian OriginPR Partially RevisedPSU Public Sector UndertakingPV Present ValueQE Quick EstimatesQEDS Quarterly External Debt StatisticsRBI Reserve Bank of IndiaRIB Resurgent India BondsSDDS Special Data Dissemination StandardsSDR Special Drawing RightsSEBI Securities and Exchange Board of IndiaSED Sovereign External DebtSLR Statutory Liquidity RatioTB Treasury Bill

TC Trade CreditXGS Exports of Goods and Services

Indias External Debt: A Status Report 2009-10" is prepared by the External DebtManagement Unit of the Department of Economic Affairs, Ministry of Finance under theoverall direction of Chief Economic Adviser (Dr. Kaushik Basu). The Unit led by EconomicAdviser (Shri Anil Bisen) comprises Additional Economic Adviser (Shri Sunil Saran),Officer on Special Duty (Dr. Rajmal) and Assistant Director (Shri Rangeet Ghosh).Dr. Bhagwan Das, Research Officer, Shri Krishan Kumar and Smt. Meera Mamgaain wereresponsible for data compilation. The Hindi Section has provided valuable support intranslation and Budget Press in Desktop publishing (DTP) and printing work.

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CHAPTER 1

OVERVIEW

1.1 India's external debt increased from US$ 224.5 billion at end-March 2009 to US$ 261.5billion at end-March 2010. The total increase was US$ 37.0 billion (16.5 per cent). The rise could largely beattributed to long-term components like external commercial borrowings, NRI deposits and Special DrawingRights (SDR) allocated by the International Monetary Fund (IMF). The valuation effect arising fromdepreciation of the US dollar against major international currencies contributed 17.8 per cent (US$ 6.6billion) to the increase.

1.2 The long-term debt at US$ 209.0 billion at end-March 2010, accounted for about 80 per centof the total external debt. The long-term debt increased by 15.4 per cent over the level at end-March 2009,while short-term debt rose by 21.0 per cent.

1.3 Government (sovereign) external debt stood at US$ 67.1 billion at end-March 2010, higherby US$ 11.2 billion (20 per cent) over its level of US$ 55.9 billion at end-March 2009. It accounted for 25.7per cent of the total external debt as compared to 24.9 per cent at end-March 2009. Government guaranteedexternal debt was marginally higher at US$ 7.7 billion (US$ 6.8 billion at end-March 2009).

1.4 As per the World Bank publication 'Global Development Finance, 2010', India was at fifthposition among top twenty developing indebted countries in 2008 in terms of stock of external debt, afterRussian Federation, China, Turkey and Brazil. In terms of the ratio of external debt to Gross NationalIncome (GNI), India's position was the fourth lowest, with China having the lowest ratio of external debt toGNI. The share of concessional credit in India's external debt portfolio was the fourth highest after Pakistan,Indonesia and the Philippines.

1.5 The analysis of trends since 1990s shows that India's external debt position has improvedsignificantly over time with debt-GDP ratio falling from 38.7 per cent in 1991-92 to 18.9 per cent in 2009-10

and debt service ratio declining from 30.2 per cent to 5.5 per cent (Annex II) . The composition of externaldebt has also undergone change with shares of both multilateral and bilateral components showing a decliningtrend in long term external debt. There is an increasing share of private players in India's total external debtfrom around 40 per cent in the first half of the nineties to over 70 per cent in the recent years. The share of the Government, the main borrower from bilateral and multilateral sources, has correspondingly declinedfrom the mid-nineties onwards.

1.6 The key debt sustainability indicators suggest that India's external debt remains at acomfortable level. The summary of key indicators is set out in Table 1.1. India's foreign exchange reservesprovided a cover of 106.7 per cent to the external debt stock as at end-March 2010 vis--vis 112.2 per centat end-March 2009. The share of short-term debt in total external debt was 20.1 per cent at end-March2010, marginally higher than 19.3 per cent at end-March 2009.


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1.7 The external debt management policy of Government of India continues to focus onmonitoring long and short-term debt, raising sovereign loans on concessional terms with longer maturities,regulating external commercial borrowings through end-use and all-in-cost restrictions, and rationalizinginterest rates on Non-Resident Indian (NRI) deposits.

1.8 The sovereign debt crisis in the euro zone has highlighted the importance of composition,

maturity profile and investor base in precipitating a debt crisis. While India's external debt remains at acomfortable level due to the active debt management policy, the nature of sovereign debt is also fundamentallydifferent from many advanced countries. The composition of Central Governments public debt shows thatthe bulk of sovereign debt is from domestic sources (about 89 per cent), and external debt accounts forabout 11 per cent, most of which is from multilateral/ bilateral sources. In domestic debt category also, asignificant share of dated securities (about 70 per cent of total public debt) are owned by commercial andco-operative banks (around 51 per cent) and insurance companies (22 per cent). Given the composition of public debt and the fact that a sizeable share of banking and insurance sector is in the public sector, therefinancing risk that has been at the root of the euro zone crisis, is at best minimal.

1.9 The Report comprises eight Chapters including an Overview. Chapter 2 deals withclassification of external debt. An analysis of short-term external debt is in Chapter 3. Chapter 4 coversdebt servicing of India's external debt. International comparison of top twenty developing debtor countriesis discussed in Chapter 5. Chapter 6 gives the details of sovereign external debt of India while Chapter 7assesses the trends and composition of external debt of India during the period 1990-2010. Finally, Chapter8 analyzes the global and euro zone debt crisis with a perspective on Indian situation.

Table 1.1: Indias Key External Debt Indicators(Per cent)

At endMarch

ExternalDebt (US$

billion)

Ratio of ExternalDebt to

GDP

DebtServiceRatio

Ratio of Foreign

ExchangeReservesto Total

Debt

Ratio of Conces-sional

Debt toTotal Debt

Ratio of Short-term

Debt toForeign

ExchangeReserves

Ratio of Short-term

Debt toTotalDebt

1 2 3 4 5 6 7 82005-06 139.1 16.7 10.1 a 109.0 28.4 12.9 14.02006-07 172.4 17.5 4.7 115.6 23.0 14.1 16.32007-08 224.4 18.1 4.8 138.0 19.7 14.8 20.42008-09 PR 224.5 20.5 4.4 112.2 18.7 17.2 19.32009-10 QE 261.5 18.9 5.5 106.7 16.8 18.8 20.1PR: Partially Revised; QE: Quick Estimates.

a: Works out to 6.3 per cent, excluding India Millennium Deposit repayments of US$ 7.1 billion and pre-payment of US$ 23.5 million.


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CHAPTER 2

CLASSIFICATION OF EXTERNAL DEBT

2.1 Stock of External Debt

2.1.1 External debt of a country indicates contractual liability of residents to non-residents . Inrupee terms, India's external debt of Rs. 1,180,073 crore at end March 2010, registered a rise of Rs. 36,283crore (3.2 per cent) over the end-March 2009 estimates. In US dollar terms, external debt stood at US$261.5 billion at end-March 2010, showing a rise of 16.5 per cent over the end-March 2009 figures (Table2.1). The valuation effect , reflecting the change in the value of the US dollar against major internationalcurrencies in which country's external debt is denominated, accounted for a rise of US$ 6.6 billion in thedebt stock. Excluding the valuation effect, the stock of external debt as at end-March 2010 would haveincreased by US$ 30.4 billion during the year.

2.1.2 Table 2.2 provides a break-up of the total external debt stock into long and short-termcomponents. During 2009-10, excluding the head 'IMF' 1, short term debt contributed the highest (21.0 percent growth) to the rise in total external debt, followed by export credit (16.5 per cent), long-term NRIDeposit (15.7 per cent) and commercial borrowings (13.7 per cent). The pick-up in export credits andcommercial borrowings in 2009-10 are indication of the ongoing process of recovery in the aftermath of the global financial crisis.

1 The increase under the head IMF is on account of Special Drawing Rights (SDR) allocations of SDR 3082.5million on August 28, 2009 and SDR 214.6 million on September 9, 2009 and the consequent increase in cumulativeSDR allocations to US$ 6.2 billion at end-December 2009. SDR allocations fall in the category of long-termreserve-related liability of the country to the other participants of the IMFs SDR Department and according to therules prescribed in the sixth edition of the Balance of Payments and International Investment Position Manual(BPM6) is included as debt liability.

Table 2.1: Indias External Debt Stock (2005-10)

Unit

at end-March

2005 2006 2007 2008 2009 PR 2010 QE

1 2 3 4 5 6 7

Rupees crore 586,305 620,522 751,402 897,290 1,143,790 1,180,073

US Dollar million 134,002 139,114 172,360 224,407 224,515 261,454

Debt to GDP Ratio 18.1 16.7 17.5 18.1 20.5 18.9

PR: Partially Revised, QE: Quick Estimates.


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2.1.3 The component wise details of external debt, since 1990 in Rupees crore is given at AnnexIII and in US$ million at Annex IV . The quarterly external debt outstanding since 2004, in Rupees croreand in US$ million is contained in Annex V and VI , respectively.

2.2 Creditor Classification

2.2.1 At end-March 2010, commercial borrowings accounted for the highest share in total external

debt at 27.2 per cent, followed by short-term debt (20.1 per cent), NRI deposits (18.4 per cent), multilateral(16.3 per cent), bilateral (8.6 per cent), export credits (6.5 per cent), IMF (2.3 per cent) and rupee debt (0.6per cent) (Table 2.3) .

2.2.2 Between 2005 and 2010, the share of multilateral and bilateral credits in total external debtdeclined from 36.4 per cent at end March 2005 to 24.9 per cent at end-March 2010, while deposits fromnon-resident Indians declined from 24.4 per cent in 2005 to 18.4 per cent. However, commercial borrowingsincreased by around 169 per cent during the period (Annex IV) , with a corresponding increase in its sharein total external debt from 19.7 per cent to 27.2 per cent. Figure 2.1 and 2.2 depicts the creditor-wise share

of total external debt at end-March 2005 and 2010, respectively.

Table 2.2 : Composition of External Debt(US$ million)

at end March Variation (Absolute) SlNo.

Components 2008 2009 PR 2010 QE March 2008 toMarch 2009 (4-3)

March 2009 toMarch 2010 (5-4)

1 2 3 4 5 6 71 Multilateral 39,490 39,538 42,733 48

(0.1)3,195(8.1)

2 Bilateral 19,708 20,613 22,596 905(4.6)

1,983(9.6)

3 IMF 1,120 1,018 6,041 (- 102(- 9.1)

5,023(493.4)

4 Export Credit 10,328 14,490 16,878 4,162(40.3)

2,388(16.5)

5 Commercial Borrowings 62,334 62,413 70,986 79(0.1)

8,573(13.7)

6 NRI Deposits(long-term)

43,672 41,554 48,092 - 2,118(- 4.8)

6,538(15.7)

7 Rupee Debt 2,017 1,527 1,657 - 490(- 24.3)

130(8.5)

8 Total Long-term Debt(1 to 7)

178,669 181,153 208,983 2,484(1.4)

27,830(15.4)

9 Short-term Debt 45,738 43,362 52,471 - 2,376(-5.2)

9,109(21.0)

10 Total External Debt(8+9)

224,407 224,515 261,454 108(0.05)

36,939(16.5)

PR: Partially Revised, QE: Quick Estimate. Figures within parenthesis indicate percentage variation.


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Table 2.3: Creditor Classification of E xterna l D ebt(Per cent)

at end Ma rchSl. Category 2005 2006 2007 2008 2009 PR 2010 QE1 2 3 4 5 6 7 81 Mu ltilatera l 23.7 23.4 20.5 17.6 17.6 16.32 Bilateral 12.7 11.3 9.3 8.8 9.2 8.63 IMF 0.8 0.7 0.6 0.5 0.5 2.34 Expor t Credits 3.8 3.9 4.2 4.5 6.5 6.55 Comme rcial Borrowings 19.7 19.0 24.0 27 .8 27.7 27.26 N RI Deposits 24.4 26.1 23.9 19.5 18.5 18.47 Rupee Debt 1.7 1.5 1.1 0.9 0.7 0.68 Total Long-term D ebt

(1 to 7)86.8 85.9 83.6 79.6 80.7 79.9

9 Short-term Debt 13.2 14.1 16.4 20.4 19.3 20.110 G rand Total (8+9) 100 100 100 100 100 100PR: Par tially Revised, QE : Quick Estimate.

Mult

Multilateral (23.7)

Bilateral (12.7)

IMF (0.8)

Export Credits (3.8)Commercial Borrowings

(19.7)

NRI Deposits (24.4)

Rupee Debt (1.7)

Short Term Debt (13.2)

Figure 2.1 : Creditor Classification of External Debt as at end-March 2005 (Per cent)


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2.2.3 Over the years, the share of official creditors in total external debt has declined; the declinewas 10.2 percentage points between end-March 2005 and end-March 2010 with private creditors accountedfor the bulk (70.5 per cent) of India's external debt (Table 2.4) .

Multilateral (16.3)

Bilateral (8.6)

IMF (2.3)

Export Credits (6.5)

Commercial Borrowings (27.2)

NRI Deposits (18.4)

Rupee Debt (0.6)

Short Term Debt (20.1)

Figure 2.2 : Creditor Classification of External Debt at end-March 2010 (Per cent)

Table 2.4: Share of Official and Private Creditors in External debt(Per cent)

At end March Official Creditors Private Creditors1 2 3

2005 39.7 60.32006 37.7 62.32007 32.2 67.82008 28.4 71.6

2009 PR 28.5 71.52010 QE 28.5 71.5

PR: Partially Revised; QE: Quick Estimates.

Note:1 Official creditors include multilateral and bilateral sources of finance, loans and credits obtained from IMF, export

credit component of bilateral credit, export credit for defence purposes and rupee debt.2 Private creditors denote sources of loans raised under ECBs, NRI deposits, export credits (other than those included

under official creditors) and short-term debt.


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2.3 Borrower Classification

2.3.1 The borrower classification of external debt provides breakup into Government (Sovereign)and non-Government debt (Table 2.5) . The latter is further categorized into financial, public and privatesectors. Non-Government debt has continued to increase in terms of its share in total external debt. Atend-March 2010, non-Government debt was around three-fourths of total external debt at 74.3 per cent.Details of Borrower classification of external debt since 1991 are provided in Annex VII and analyzed inChapter 7.

2.3.2 The share of the financial, private and public sector in total non-government external debt inFigure 2.3 reveals that while the share of public sector in total long term non-government debt has remainedsteady around 7 per cent during the period 2005-10, the share of financial sector has fallen to 28.9 per centat end-March 2010, as compared to the level of 50.4 per cent in 2005 (Table 2.6) . This is due to the fact thataccess to overseas funds by the private sector has shown persistent rise over the 2007-10 periods (mainly onaccount of more liberal access to external commercial borrowings) vis--vis the financial sector. The privatesector accounted for the highest (37.3 per cent) share in total non-Government external debt at end-March2010.

Table 2.5: External Debt by Borrower Classification

(US$ million) S l.

Componentsat end-March

2005 2006 2007 2008 20 09 PR 2010 QE1 2 3 4 5 6 7 8

I. Government Debt (A+B) 47,697 46,259 49,360 58,068 55,874 67,064

A . Of which long -term (1+2): 46,538 46,119 49,034 57,453 54,935 65,546

1 Govt. Account 43,686 43,510 46,155 52,538 5 1,816 55,2322 Other Govt. Debt 2,852 2,609 2,879 4,9 15 3,1 19 10,314

B. Of which s hort-term: 1,159 140 326 615 939 1,518

II. Non-Government Debt(C+D)

86,305 92,855 123,000 166,339 168,641 194,390

C . Of which long -term(1+2+3):

69,741 7 3,456 95,196 121,216 126,218 143,437

1 Financial Sector 1 43,455 42,334 48,414 51,138 48,858 56,252

2 Public Sector 2 6,496 6,67 1 7,978 11,040 12,356 14,581

3 Private S ector 3 19,790 24,451 38,804 59,038 65,004 72,604

D . Of which s hort-term: 16,564 19,399 27,804 45,123 42,423 50,953

III. Total External Debt (I+II) 134,002 139,11 4 172,360 224,407 224,515 261,454

Memo Items:

Share of Governmentdebt in total debt (%)

35.6 33.3 28.6 25.9 24.9 25.7

Share of Non-Government deb t intota l d ebt (%)

64.4 66.7 71.4 74.1 75.1 74.3

Ratio of G overnme ntdebt to GD P (%)

6.3 5.4 5.0 4.7 5.1 4.9

P R: Partially Revised; QE : Q uick Estimate s.

1: Financial sector represents borrowings by banks and financial institutions and also long-term NRIDeposits.

2: Public sec tor deb t repr esents borro wings of no n- financial public sector enterprises.3: Private sector debt represents borrowings of no n- fina ncial private sector enterprises.


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2.4 Instrument-wise Classification

2.4.1 The instrument-wise classification of external debt viz., bonds, loans, trade credits anddeposits along with borrower details is in Table 2.7 and Annex VIII . The share of loans, which includesmultilateral, bilateral and bank loans, was 49 per cent at end-March 2010, followed by deposits (20.7 percent), trade credits (19 per cent) and bonds (11.3 per cent).

2.4.2 For the Government and the non-financial private sector, the bulk of the external debt is vialoans, while deposits constitute the major instrument for the financial sector. Trade credits account formajority share in short term external debt.

Table 2.6: Composition of Non-Government External Debt

(per cent)at end-MarchComponent/Sector 2005 2006 2007 2008 2009 2010

1 2 3 4 5 6 7A Long-term Debt 80.8 79.1 77.4 72.9 74.8 73.8

of which

i. Financial Sector 50.4 45.6 39.4 30.7 29.0 28.9

ii. Public Sector 7.5 7.2 6.5 6.6 7.3 7.5

iii. Private Sector 22.9 26.3 31.5 35.6 38.5 37.4B Short-term Debt 19.2 20.9 22.6 27.1 25.2 26.2

Total (A+B) 100.0 100.0 100.0 100.0 100.0 100.0

0

10

20

30

40

50

60

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Financial Year

Figure 2.3: Share of Long Term Debt of Financial,Public and Private Sectors inTotal Non-Government External Debt (per cent)

Financial Public Private


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2.5 Currency Composition2.5.1 The currency composition of India's external debt (Table 2.8 and Figures 2.4 and 2.5)

reveals that the US dollar denominated debt remained dominant. The share of US dollar debt in totalexternal debt was at 53.3 per cent at end-March 2010 (slightly less than the 54.1 per cent registered at end-March 2009), followed by the Indian rupee (18.7 per cent), Japanese yen (11.4 per cent) and SDR (10.7 percent). Time series data on currency composition of external debt since 1994 is contained in Annex IX andanalyzed in Chapter 7.

Table 2.7: Instrument-wise Classification of External Debt at end-March 2010(US$ million)

Sl Borrowers Bonds Loans TradeCredits

Deposits Total

1 2 3 4 5 6 7

I Government 3,026(1.2) 55,100(21.1) 1,379*(0.5) 6,041**(2.3) 65,546( 25.1 )II Financial Sector 6,689

(2.6 )7,311(2.8)

0.0(0.0)

48,092(18.4)

62,092( 23.8 )

III Non-Financial Public Sector 1,020(0.4)

13,560(5.2)

1.0(0.0)

0.0(0.0)

14,581( 5.6 )

IV Non-Financial Private Sector 13,882(5.3)

52,225(20.0)

657(0.3)

0.0(0.0)

66,764( 25.5 )

V Short-Term Debt 4,856(1.9)

0.0(0.0)

47,615(18.2)

0.0(0.0)

52,471( 20.1 )

VI Total External debt***(I to V)

29,473(11.3 )1

128,197( 49.0 )

49,651(19.0)

54,133( 20.7 )

261,454(100.0 )

* For the Government this signifies export credit component of bilateral external assistance.** IMF SDR allocations have been classified as Deposits under the Government head. ***Items I to IV constitute Total Long term Debt.1 Includes Money market instruments.Figures in parentheses denote percentage of the total external debt (US$ 261,454 million)

Table 2.8: Currency Composition of External Debt(per cent)

Sl. Currency at end-March

2005 2006 2007 2008 2009 PR 2010* QE1 2 3 4 5 6 7 8

1 US Dollar 47.7 48.8 51.1 55.3 54.1 53.32 Indian Rupees 19.4 18.8 18.5 16.2 15.4 18.73 Japanese Yen 10.4 10.9 11.4 12.0 14.3 11.44 SDR** 14.9 14.3 12.4 10.6 9.8 10.75 Euro 4.6 4.4 3.9 3.5 4.1 3.66 Pou nd Sterling 2.6 2.6 2.4 2.2 2.0 1.87 Other s 0.4 0.2 0.3 0.2 0.3 0.5

Tota l (1 to 7) 100.0 100 .0 100.0 100.0 100 .0 100 .0PR: Partially Revised; QE: Quick Estimates.* The figures for end-March 2010 result from denomina ting FII investment in rupees.** The SDR was created by the IMF in 1969 to serve as an international reserve asset to supplement the official

reserves of the member countries. The SDR valuation basket ,w.e.f January 1,2006, consists of the followingcurrencies with th eir associated weigh tages : US Dolla r (44 per cent), Euro(34 per cent), Japanese Yen (11 per cent)and Pound Sterling (11 per cent) ( Source : IMF ). The curren cy comp osition in Table 2.8 has SDR as a category. Incase the currencie s in the SDR basket are separately consi dered, the share of each currency in the Table would go upcorrespondingly.


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US Dollars (47 .7)

Indian Rup ees (19.4)

Japa nese Yen (10.4)

SDRs(14.9)

Euro (4.6)Poun d Sterling (2.6) Others (0.4)

Figure 2.4 : Currency Composition of External Debt at end-March 2005 (per cent)

US Dollars (53.3)

Indian Rupees (18.7)

Japa nese Yen (11.4)

SDRs(10.7)

Euro (3.6)Pound Sterling (1.8) Others (0.5)

Figure 2.5 : Currency Composition of External Debt as at end-March 2010 (per cent)


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Box 2.1 : Rupee denominated debt

India's External Debt denominated in Rupees consist of the following categories:-

i. Rupee Debt ; The outstanding state credits (both defence and civilian) extended to India bythe erstwhile Union of Soviet Socialist Republics (USSR). The debt is denominated in

Rupees and repayment of such debt is made primarily through the export of goods toRussia;

ii. Rupee Denominated NRI Deposits viz. the Non-Resident (External) Rupee Account{NR(E)RA} and the Non-Resident Ordinary Rupee (NRO) Accounts;

iii. FII Investments in Government Treasury Bills (TBs) and dated securities (with an annualceiling of US$ 5 billion on such investments) and

iv. FII Investments in corporate debt securities (with an annual ceiling of US$ 15 billion onsuch investments).

The NR(E)RA is categorized as an external debt liability since the principal amount held in such accountsas well as the interest accrued are repatriable. In case of the NRO Account, NRIs and Persons of IndianOrigin (PIO) are eligible to annually remit an amount up to US$ 1 million out of the balances held insuch accounts.

Unlike foreign currency denominated debt, where the currency risk is borne by the borrower , thecharacteristic feature of domestic currency denominated debt is that the exchange risk is borne by thecreditor . The contractual liability, however, is settled in terms of the designated foreign currency (throughexports in case of Rupee debt owed to Russia).This implies that the borrower gains (and the creditor loses) when the local currency depreciates since less has to be repaid in foreign currency terms and viceversa. The table below shows the amount held under each of the above heads (i) to (iv).

Rupee denominated debt at end-March 2010

(US$ million)

S. No. Component Amount

1 2 3

1. COMMERCIAL BORROWINGS (a+b) 13,489

a) FII Investment in Treasury Bills/dated securities and

corporate debt instruments* 12,222b) Others 1,267

2. NRI DEPOSITS [(Above one year maturity (a+b)] 33,774

a) NR(E)RA 26,362

b) NRO Deposits 7,412

3. RUPEE DEBT (a+b) 1,657

a) Defence 1,486

b) Civilian 171

4. GRAND TOTAL (1 to 3) 48,920* Includes both short and long term.


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2.6 Concessional Debt

2.6.1 Concessionality in external debt indicates softer terms of a loan in relation to the prevailingmarket conditions. Concessionality could be reflected in lower rate of interest, longer grace or repaymentperiods. It is measured by the difference between the face value of a credit and the sum of the discountedfuture debt service payments.

2.6.2 Different multilateral institutions follow different norms for classifying credits intoconcessional and non-concessional. In India loans from International Development Association (IDA),International Fund for Agricultural Development (IFAD), Rupee debt are categorized as concessional. Theproportion of concessional loans in total external debt has declined steadily from 30.7 per cent in 2005 to16.8 per cent at end-March 2010 (Table 2.9) .

2.7 Summary

2.7.1 India's external debt increased by 16.5 per cent, from US$ 224.5 billion at end-March 2009to US$ 261.5 billion at end-March 2010. The ratio between long and short-term debt was around 80:20 atend-March 2010. Among the long-term components, commercial borrowings accounted for the largestshare followed by NRI deposits, multilateral, bilateral and export credit. The share of private creditorsincreased from 60.3 per cent in 2005 to 70.5 per cent at end-March 2010. The share of government debt was25.7 per cent, while the share of non-government debt was 74.3 per cent in total external debt at end March2010. US dollar denominated debt, with its share of 53.3 per cent at end-March 2010, continues to dominateIndia's total external debt. The element of concessionality in total external debt stood at 16.8 per cent atend-March 2010.

Table 2.9 : Share of Concessional Debt in Total External Debt

(US$ million) Sl. Component at end-March

2005 2006 2007 2008 2009 PR 2010 QE

1 2 3 4 5 6 7 8

1 Total external debt (2+3)

1,34,002 1,39,114 1,72,360 2,24,407 2,24,515 2,61,454

2 Concessional debt 41,107 39,559 39,567 44,164 41,903 43,926

3 Non-concessional debt 92,895 99,555 1,32,793 1,80,243 1,82,612 2,17,528

4 Concessiona l debt asshare of total debt(per cent)

30.7 28.4 23.0 19.7 18.7 16.8

Note : Cred itor classification approach is used for classifying debt as concessional.PR: Partially Revised; QE: Quick Estimates.


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CHAPTER 3

SHORT-TERM EXTERNAL DEBT3.1 Introduction3.1.1 Short-term debt is an important component of external debt. Large and increasing magnitude

of such debt may pose problems, especially in times of crisis, when access to international capital market is

limited and the roll over or refinancing opportunities may not be easily forthcoming. The financial crisis inthe emerging economies in the second half of 1990s underlined the importance of using short-term residualmaturity external debt as a vulnerability indicator. The recent global financial crisis exhibit higher volatilityfor short-term flows vis--vis medium and long term flows.

3.2 India's Short-Term Debt3.2.1 While the compilation of external debt statistics, based on original maturity helps in

understanding the nature of debt flows, residual maturity is useful in assessing debt servicing obligationsduring the ensuing year. Short-term debt by residual maturity comprises all the components of short-termdebt with original maturity of up to one year, and amounts falling due under long-term debt during the oneyear reference period.

3.3 Short-term External debt by Original Maturity3.3.1 India's short-term external debt by original maturity has exhibited an upward trend, both in

absolute terms and as a percentage of total external debt. This is, however, largely on account of revision inthe coverage of short-term debt in recent years. The data on short-term debt includes: (i) Trade credit upto180 days and above 180 days & upto 1 year (ii) Foreign Institutional Investor (FII) investments in GovernmentTreasury Bills and corporate securities, (iii) investments by foreign central banks and international institutionsin Treasury Bills and (iv) external debt liabilities of foreign central banks and commercial banks.

3.3.2 India's Short-term debt at end-March 2010 stood at US$ 52.5 billion, reflecting an increaseof 21 per cent over end-March 2009 level. Trade related credits contributed 84 per cent of the total rise inshort-term debt stocks at end-March 2010. The share of trade credit in short-term debt was 90.7 per cent atend-March 2010 as against 92.2 per cent at end-March 2009. The components and their share in total short-term debt at end-March 2010 are in Figure 3.1 and Table 3.1.

3.3.3 At end-March 2010, trade credits outstanding at US$ 47.6 billion showed an increase of 19.1 per cent over at end-March 2009. At this level, it accounted for 15.9 per cent of total imports in 2009-10as against 13.0 per cent in 2008-09.

90.7

6.40.2 1.3 1.3

Figure 3.1: Components of Short-Term Debt at end-March 2010 (per cent)

Trade Credits

FII Investment in GovernmentTreasury Bills & Corporate securities

Investment in Treasury Bills byForeign Central Banks/InternationalInstitutions

External Debt Liabilities of CentralBank

External Debt Liabilities of Commercial Banks


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Table 3.1: Short-term Debt by Original Maturity(US$ million)

Sl.No.

Category at end-March2005 2006 2007 2008 2009

PR2010QE

1 2 3 4 5 6 7 81 Short-term Debt (a to d) 17,723 19,539 28,130 45,738 43,362 52,471

a) Trade Credits 16,271 19,399 25,979 41,901 39,964 47,615

1) Above 6 months and upto 1 year

7,529 8,696 11,971 22,884 23,346 28,002

2) Up to 6 months 8,742 10,703 14,008 19,017 16,618 19,613

b) FII investment in Govt.Treasury Bills andcorporate securities

1,452 140 397 651 2065 3,357

c) Investment in TreasuryBills by foreign centralbanks and internationalInstitutions, etc.

- - 164 155 105 103

d) External debt liabilities of - - 1,590 3,031 1,228 1,3961) Central Bank - - 501 1,115 764 695

2) Commercial Banks - - 1,089 1,916 464 701

2 Long-term debt 116,279 119,575 144,230 178,669 181,153 208,983

3 Total External Debt(1+2)

134,002 139,114 172,360 224,407 224,515 261,454

Memo Items

A Imports (during the year) 118,908 157,056 190,670 257,629 307,651 299,491

B Ratio of Trade Credits toImports (%)

13.7 12.4 13.6 16.3 13.0 15.9

C Ratio of Short-term tototal debt (%) 13.2 14.0 16.3 20.4 19.3 20.1

PR: Partially Revised; QE: Quick Estimates. Notes: (i) Short-term deposits of less than one-year maturity under FCNR(A) were withdrawn with effect fromMay 15, 1993. Such deposits under FCNR(B) and NR(E)RA were withdrawn effective October 1999 and April2003, respectively. (ii) Data on short-term trade credits of less than six months in respect of suppliers credit areavailable beginning March 2005. (iii) Imports data are on balance of payments basis.

3.4 Short-term External Debt by Residual Maturity

3.4.1 Short-term debt by residual maturity comprises principal repayments due during a one-yearreference period under long-term loans together with short-term debt of original maturity of one year orless. The residual maturity concept provides an indication of maturing debt obligations and the liquidityrequirements to service contractual obligations within a year.

3.4.2 Based on residual maturity, India's short-term debt stood at US$ 66.8 billion as at the end-

March 2010 (Table 3.2 and Figure 3.2) . At this level, it accounted for 25.6 per cent of total external debtand 23.9 per cent of foreign exchange reserves. The details of short-term debt by remaining maturity since1990 are given at Annex X.


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3.5 Summary

3.5.1 At end-March 2010, India's short-term original maturity debt accounted for 20.1 per cent of total external debt, marginally higher than 19.3 per cent at end-March 2009. The share of trade relatedcredits in short-term debt stood at 90.7 per cent and contributed 84 per cent of the total increase in short-term debt between end-March 2009 and end-March 2010.

3.5.2 On the basis of residual maturity, the share of short-term debt in total external debt was 25.6per cent at end-March 2010 (25.2 per cent at end-March 2009). At this level, the ratio of residual maturity

short-term debt to foreign exchange reserves stood at 23.9 per cent as against 22.5 per cent at end-March2009.

4.43.0

3.9 4.4 4.75.1

22.7

16.818.3 17.6

22.523.923.9

18.3

21.2

24.4 25.225.6

0

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010

Figure 3.2: Residual Maturity Short Term Debt Indicators (per cent)

Per cen t of GDP Per cent of Foreign Exchange Reserves Per cent of Total Debt

17.7

Table 3.2: Short term Debt by Residual Maturity(US$ million)

at end MarchComponent 2005 2006 2007 2008 2 009 PR 2010 QE

1 2 3 4 5 6 71. Short-term Debt(Original Maturity) 17,723 19,539 28,130 45,738 43,362 52,471

2. Long-term debt obligations maturingwithin one year 14,341 5,936 8,340 8,994 13,241 14,350*

3. External debt (residual maturity) (1+2) 32,064 25,475 36,470 54,732 56,603 66,821Per cent of GDP 4.4 3.0 3.9 4.4 4.7 5.1Per cent to Total Debt 23.9 18.3 21.2 24.4 25.2 25.6

Per cent of foreign exchange reserves 22.7 16.8 18.3 17.7 22.5 23.9

PR: Partially Revised, QE: Quick Estimates.

Note : (I) Estimates of long-term debt obligations maturing within one year have been calculated on post facto basis and includesrepayments arising from prepayments of long-term debt.

*: Long term debt maturing within one year (2010-11) has been calculated by aggregating projected debt service payments ondebt outstanding as at 31 st March 2010. It excludes debt service on FII investment in Government / corporate securities andNRI deposits.

Figure 3.2: Residual Maturity Short-term Debt Indicators (per cent)


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CHAPTER 4

DEBT SERVICE

4.1 Introduction

4.1.1 Debt service payments and debt service ratio occupy a central place in debt analysis. Debt

service ratio, as measured by the proportion of total debt service payments (i.e. principal repayment plusinterest payment) to current receipts of Balance of Payments (BoP), is an indicator of debt sustainability. Itindicates the claim that servicing of external debt makes on current receipts and is, therefore, a measure of strain on BoP due to servicing of contractual obligations.

4.2 Debt Service Payments and Debt Service Ratio

4.2.1 The debt service payments comprise principal repayments and interest payments on theoutstanding debt. When debt service payments are large relative to the current receipts, the BoP would beunder strain and the economy less resilient to external shocks. A higher debt service ratio may also haveadverse impact on the country's sovereign credit rating. Recording and monitoring of debt service paymentsare, therefore important elements of effective external debt management.

4.2.2 Recent trends in India's external debt service ratio are presented in Figure 4.1 . The debtservice ratio remained below 5 per cent during 2006-07 to 2008-09. However, it increased to 5.5 per cent in2009-10 because of higher repayments under external commercial borrowings.

4.2.3 During the period 2006-07 to 2008-09, India's total external debt service payments remainedin the range of US$ 11.4 billion to US$ 15.5 billion, before increasing to US$ 18.9 billion in 2009-10.Table 4.1 provides component-wise debt service payments during 2005-06 to 2009-10. The details of debt service payments, since 1990-91 to 2009-10 is given at Annex XI .

Table 4.1 : Indias External Debt Service Payments(US$ million)

Sl. Components April-March

2005-06 2006-07 2007-08 2008-09PR 2009-10QE

1 2 3 4 5 6 7

1 External Assistance 2,652 2,942 3,241 3,381 3,330Repayments 1,945 1,960 2,099 2,372 2,497Interest 707 982 1,142 1,009 833

10.1

4.7 4.84.4

5.5

0

2

4

6

8

10

12

2005-06 2006-07 2007-08 2008-09 2009-10

Figure 4.1: India's Debt Service Ratio (per cent)


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2 External Commercial Borrowings 14,839 6,331 9,771 10,485 13,893

Repayments 11,824 3,814 6,119 6,521 10,647

Interest 3,015 2,517 3,652 3,964 3,246

3 NRI Deposits 1,497 1,969 1,813 1,547 1,599

Interest 1,497 1,969 1,813 1,547 1,599

4 Rupee Debt Service 572 162 122 101 97

Repayments 572 162 122 101 97

5 Total Debt Service (1 to 4) 19,560 11,404 14,947 15,514 18,919

Repayments 14,341 5,936 8,340 8,994 13,241

Interest 5,219 5,468 6,607 6,520 5,678 Memo items:

Current Receipts 1 194,170 242,811 314,284 351,890 342,878

Debt Service Ratio (%) 10.1 2 4.7 4.8 4.4 5.5

Interest payments /current receipts (%) 2.7 2.3 2.1 1.9 1.7

PR: Partially Revised; QE: Quick Estimates. 1: Total Current Account Receipts minus officials transfers

2: Works out to 6.3 per cent, when India Millennium Deposits (IMDs) repayments of US$ 7.1 billion and pre-payment of US$

23.5 million are excluded.4.2.4 Figure 4.2 provides the breakup of debt service payments (principal repayments and interest

payments) during 2005-06 to 2009-10. During 2009-10, principal repayments at US$ 13.2 billion reflectedan increase of 47.2 per cent on account of higher ECBs repayments. The principal repayments accountedfor 70.0 per cent of total debt service payments, while the rest was interest payments.

1 2 3 4 5 6 7

1 4

. 3

5 . 9

8 . 3 9

. 0

1 3

. 2

5 . 2 5

. 5 6

. 6 6

. 5

5 . 7

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2005-06 2006-07 2007-08 2008-09 2009-10

P e r c e n

t

Figure 4.2: India's External Debt Service Payments (US$ billion)

Principal Repayments Interest Payments


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4.2.5 Component-wise, the debt service on external commercial borrowings continues to dominate,with its share increasing from 67.6 per cent of total debt service in 2008-09 to 71.5 per cent in 2009-10.Other components viz., debt service payments under external assistance (19.2 per cent), NRI deposits (8.8per cent) and rupee debt service (0.5 per cent) contributed the rest (Figure 4.3) .

4.2.6 India's external debt service payments by creditor category are presented in Table 4.2 andAnnex XII .

Table 4.2: India's External Debt Service Payments Based on Creditor Category(US$ million)

Sl. No. Creditor April-March

Category 2005-06 2006-07 2007-08 2008-09PR 2009-10QE

1 2 3 4 5 6 7

1 Multilateral : 1,549 1,866 2,096 2,014 2,001

Principal 1,060 1,149 1,255 1,365 1,515

Interest 489 717 841 649 486

2 Bilateral : 1,491 1,400 1,615 1,807 1,832

Principal 1,193 986 1,098 1,268 1,314

Interest 298 414 517 539 518

3 Export Credit : 1,343 1,033 1,971 1,639 1,846

Principal 1,114 645 1,345 1,157 1,392

Interest 229 388 626 482 454

4 Commercial Creditors: 13,108 4,974 7,330 8,406 11,544

Principal 10,402 2,994 4,520 5,103 8,923

Interest 2,706 1,980 2,810 3,303 2,621


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5 NRI Deposits : 1,497 1,969 1,813 1,547 1,599

Interest 1 1,497 1,969 1,813 1,547 1,599

6 Rupee Debt : 572 162 122 101 97

Principal 572 162 122 101 97

7 Total Debt Service: 19,560 11,404 14,947 15,514 18,919

Principal 14,341 5,936 8,340 8,994 13,241

Interest 5,219 5,468 6,607 6,520 5,678

PR: Partially Revised; QE: Quick Estimates.

1: Interest payments on NRI Deposits include both long and short term components. Interest payments on 'Commercialborrowings' include interest payments on short-term debt.

Notes: (i) Interest payments on different debt components are calculated on cash payment basis except Non- Resident

Indian Deposits for which accrual method is used. Principal repayment under NRI deposits is not included indebt service payments, as these deposits are largely rolled over and are also locally withdrawn on maturity for rupee expenditure. Rupee debt service payments are treated as principal repayments as it is difficult to segregatethe interest component.

(ii) There may not be one to one correspondence between some categories in Tables 4.1 and 4.2 because of different classifications.

4.2.7 The principal repayments under short-term debt are not included in total debt servicepayments, which is in line with the best international practice 1. Net disbursement (gross disbursementsminus principal repayments) on short-term debt, however, is a useful indicator of external shocks. Theexperience of recent global crisis shows that gross disbursements of short-term credit to India declined in2008-09 while repayment increased significantly, resulting in net outflows in 2008-09. With the revival of global financial markets and economic growth, short-term trade credit experienced net inflows in 2009-10(Table 4.3).

Table 4.3: Disbursements and Principal Repayments under Short-term Debt

(US$ million)

Period Disbursements Principal Repayment Net(April-March) (2-3)

1 2 3 4

2005-06 21,505 17,806 3,699

2006-07 29,992 23,380 6,612

2007-08 47,658 31,729 15,929

2008-09PR 41,841 43,750 -1,909

2009-10QE 53,565 45,913 7,652

PR: Partially Revised; QE: Quick Estimates

Source: Reserve Bank of India, Balance of Payment data

1 2 3 4 5 6 7

1 External Debt Statistics Guide for Compilers and Users, International Monetary Fund, 2003.


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4.3 Terms of Borrowings

4.3.1 Implicit interest rate on total external debt is estimated by taking interest payments duringthe year as a percentage of the outstanding debt at the end of the previous year. During 2009-10, the implicitinterest rate on total external debt was 2.5 per cent (2.9 per cent during 2008-09). The implicit interest onNRI deposits stood at 3.9 per cent as against 3.5 per cent in 2008-09. The rate on external assistancedeclined marginally to 1.5 per cent from 1.8 per cent during 2008-09. The implicit interest rate on ECB alsowitnessed decline from 5.6 per cent during 2008-09 to 4.2 per cent in 2009-10 (Table 4.4).

Table 4.4: Implicit Interest Rate on India's External Debt(per cent)

Components April March

2005-06 2006-07 2007-08 2008-09PR 2009-10 QE

1 2 3 4 5 6

Implicit Interest Rate on TotalExternal Debt 3.9 4.0 3.9 2.9 2.5

Of which:

1 External Assistance 1.5 2.1 2.3 1.8 1.5

2 NRI Deposits 4.6 5.4 4.4 3.5 3.9

3 External Commercial Borrowings 9.5 7.8 7.5 5.6 4.2

PR: Partially Revised; QE: Quick Estimates

4.3.2 Average terms of new commitments for India from official and private creditors are presentedin Table 4.5. As expected, the average terms are relatively favourable for official creditors vis--vis privatecreditors.

Table 4.5: Average terms of new commitments for India

Year Official Creditors Private Creditors

Interest Maturity Grace period Interest Maturity Grace period(per cent) (Years) (Years) (per cent) (Years) (Years)

1 2 3 4 5 6 7

2000 5.5 24.0 6.6 4.3 5.1 4.8

2005 3.0 25.2 7.0 4.6 3.5 3.5

2006 3.0 28.1 5.1 2.1 3.8 2.7

2007 4.6 21.4 5.3 6.2 9.4 2.8

2008 1.3 26.9 6.1 - - -

Source: World Bank, Global Development Finance Report, 2010.

4.4 Projections of Debt Service Payments

4.4.1 Debt service projections based on long-term debt outstanding at the end of March 2010,show that debt service payments will reach the high of US$ 21.3 billion (US$ 18.2 billion principal repayment

and US$ 3.1 billion interest) in 2012-13 (Table 4.6 and Figure 4.4). The large debt service paymentsduring 2011-12 to 2012-13 are primarily on account of higher repayments of ECBs during this period. Therepayment of NRI deposits and FII investment in debt securities are not included in the projections.


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Table 4.6 : Projected Debt Service Payments(US$ million)

Year Principal Interest Total (2+3)

1 2 3 4

2010-11 14,350 2,825 17,1752011-12 15,592 3,302 18,894

2012-13 18,182 3,121 21,303

2013-14 14,253 2,206 16,459

2014-15 16,311 1,983 18,294

2015-16 11,682 1,604 13,286

2016-17 13,071 603 13,674

2017-18 10,310 452 10,7622018-19 9,760 354 10,114

2019-20 5,775 766 6,541

Note: Debt Service payment projections include external assistance, ECB and FCCB.

4.5 Summary

4.5.1 India's external debt service payments continue to remain within manageable limits. Duringthe period 2006-07 to 2008-09, they were in the range of 4.4 per cent to 4.8 per cent before increasing to 5.5per cent in 2009-10 due to higher repayments under external commercial borrowings (ECBs). Debt service

on ECBs, with the share of 71.5 per cent, dominated the total debt service payments in 2009-10, followedby external assistance, NRI deposits and rupee debt.

14.415.6

18.2

14.316.3

11.713.1

10.3 9.8

5.8

2.83.3

3.1

2.2

2.0

1.6

0.6

0.50.4

0.8

0.0

5.0

10.0

15.0

20.0

25.0

2 0 1 0 - 1

1

2 0 1 1 - 1

2

2 0 1 2 - 1

3

2 0 1 3 - 1

4

2 0 1 4 - 1

5

2 0 1 5 - 1

6

2 0 1 6 - 1

7

2 0 1 7 - 1

8

2 0 1 8 - 1

9

2 0 1 9 - 2

0

U S $ b i l l i o n

Principal Interest

Figure 4.4: Projected Debt Service Payments during 2010-11 to 2019-20


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CHAPTER 5INTERNATIONAL COMPARISON

5.1 Introduction

5.1.1 A cross-country comparison of external debt provides an understanding of a country's externalindebtedness in international perspective. The annual publication of the World Bank titled 'GlobalDevelopment Finance' provides comparable external debt positions for developing countries in terms of debt numbers and key indicators. A comparative picture of India's external indebtedness vis--vis top twentydeveloping debtor countries, in terms of select indicators, based on Global Development Finance Report,2010, is presented in Annex XIII .

5.2 External Debt of Developing Countries

5.2.1 External debt stock of 128 developing countries stood at US$ 3,718.5 billion at end-December2008, up by 7.8 per cent over its previous year's level of US$ 3,450.8 billion (Table 5.1) . The debt stock had

increased sharply by 22.8 per cent in 2007. Of the total external debt of developing countries in 2008, long-term debt accounted for 76.6 per cent, while the rest was short-term debt (22.7 per cent) and the IMF credit(0.7 per cent).

Table 5.1: External Debt of Developing Countries: Key Indicators(US$ billion)

2004 2005 2006 2007 2008

1 2 3 4 5 6

External debt stock 2,606.2 2,622.5 2,810.6 3,450.8 3,718.5

Of which:1. Long-term external debt 2,056.9 2,054.5 2,179.3 2,577.9 2,848.42. Use of IMF credit 96.0 49.2 19.9 15.5 25.73. Short-term external debt 453.3 518.8 611.5 857.3 844.4

Memo Items:

External debt stocks to exports (%) 90.2 73.7 64.6 65.3 58.7External debt stocks to GNI (%) 32.1 27.1 24.7 24.6 22.1Debt service to exports (%) 14.0 13.2 12.4 10.2 9.5

Short-term to external debt stock (%) 17.4 19.8 21.8 24.8 22.7Reserves to external debt stock (%) 61.8 76.4 94.2 108.6 108.2Reserves to imports (months) 7.0 7.2 7.9 9.1 8.0

Source: Global Development Finance, 2010.

5.2.2 In terms of debt sustainability indicators, there was an improvement in the ratio of externaldebt to Gross National Income (GNI) and debt service ratio. The ratio of short-term to total external debtimproved to 22.7 per cent in 2008 as against 24.8 per cent in 2007.

5.2.3 Long-term external debt of developing countries increased by 81.3 per cent between 1990

and 2000 and by 58.2 per cent during 2000-2008. Borrower-wise details of long-term external debt showsa shift towards private sector borrowers, which accounted for about 52 per cent of the total long termexternal debt in 2008 (Table 5.2).


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Table 5.2 : Share of Public and Private Sector in Long-termExternal Debt of Developing Countries

(Per cent)

Year Public sector Private sector

1 2 32000 71.4 28.6

2004 69.7 30.3

2005 63.6 36.4

2006 56.9 43.1

2007 51.8 48.2

2008 48.4 51.6

Source: World Bank, Global Development Finance Report, 2010.5.2.4 The analysis of external debt of 128 developing countries reveals that out of the total external

debt stock of US$ 3718.5 billion in 2008, twenty developing countries accounted for US$ 2999.0 billion(80.7 per cent). Among the top twenty debtor countries, the external debt stock of Argentina and Thailanddeclined between 2000 and 2008. A sharp rise was noticed in the external debt stock of Romania (840.3 percent), Latvia (767.3), Kazakhstan (765.4 per cent), Ukraine (658.6 per cent), Poland (236.3 per cent) andRussian Federation (151.5 per cent). China recorded an increase of 159.6 per cent in its external debt stock,while India's external debt increased by 130.1 per cent during the period 2000-2008 (Figure 5.1).

5.3 India's External Debt

5.3.1 India was the fifth most indebted country in 2008 in terms of absolute debt stock amongstthe top twenty debtor countries of the developing world, after Russian Federation, China, Turkey, and

Brazil. The ratio of India's external debt stock to Gross National Income (GNI) at 19.0 per cent was howeverthe fourth lowest with China having the lowest ratio 8.7 per cent in 2008 (Table 5.3).

8 4 0

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k e y I n d i a

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l

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T h a i l a n d

Figure 5.1 : International Comparison of Change in External

Debt Stock between 2000 and 2008 (per cent)


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Table 5.3 International Comparison of Top Twenty Developing Debtor Countries, 2008

Sl. No. Countries Total external Short-term Ratio of total Debt Ratio of foreigndebt stock debt debt to Gross Service exchange

(US$ (US$ National Ratio reserves/ million) million) Income (per cent) total debt

(per cent) (per cent)

1 2 3 4 5 6 7

1 Russian Federation 402,453 54,655 25.8 11.5 106.1

2 China 378,245 187,188 8.7 2.0 514.5*

3 Turkey 277,277 50,714 35.3 29.5 26.6

4 Brazil 255,614 36,652 16.2 22.7 75.8

5 India 230,611 45,246 19.0 8.7 111.6

6 Poland 218,022 64,904 42.1 25.0 28.5

7 Mexico 203,984 24,427 19.1 12.1 46.7

8 Indonesia 150,851 26,565 30.4 13.4 34.2

9 Argentina 128,285 37,523 39.9 10.7 36.2

10 Kazakhstan 107,595 10,637 95.0 41.8 18.5

11 Romania 104,943 31,116 54.7 25.3 37.9

12 Ukraine 92,479 20,397 51.7 19.4 34.1

13 Malaysia 66,182 22,800 35.1 - 139.3

14 Philippines 64,856 7,001 35.0 15.5 57.8

15 Thailand 64,798 24,210 32.0 7.7 171.3

16 Chile 64,277 14,910 41.3 18.2 35.9

17 Venezuela 50,229 16,994 16.0 5.6 85.7

18 Pakistan 49,337 1,395 28.7 8.7 18.3

19 Colombia 46,887 5,684 20.2 16.2 50.5

20 Latvia 42,108 14,091 127.3 37.7 12.5

*: Foreign exchange reserves data are sourced from State Administration of Foreign Exchange, Government of China.

Note: Countries are arranged based on the magnitude of debt presented in column no.3 in the Table.

Source: World Bank, Global Development Finance, 2010.

5.3.2. In terms of the cover provided by foreign exchange reserves to external debt, India's positionwas the fourth highest at 111.6 per cent after China, Thailand and Malaysia. Among the top twenty developingdebtor countries, 24.4 per cent of their total external debt was short term and the ratio of short-term to totalexternal debt in the range of 3 per cent to 50 per cent (Figure 5.2) . However, in five countries, viz., China,Thailand, Malaysia, Venezuela, and Latvia, short-term debt accounted for more than one-third of their externaldebt. India's position was the tenth lowest with Pakistan having the lowest ratio of short-term to total externaldebt. These estimates may not however be entirely comparable due to differences in coverage etc.


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5.3.3 The present value (PV) of external debt outstanding is arrived at by discounting the nominalvalue of all future debt service payments by the prevailing market rates of interest and aggregating suchPVs. The interest rates used in the calculations are the Commercial Interest Reference Rates for each relevantcurrency compiled and published by the Organization for Economic Cooperation and Development (OECD).The PV of India's external debt worked out to US$ 203.0 billion in 2008, with the ratios of PV of externaldebt to Gross National Income and export of goods and services at 18 per cent and 70 per cent, respectively(Table 5.4).

Table 5.4: Present Value based Indicators of Top TwentyDeveloping Debtor Countries, 2008

Sl. No. Countries Total Debt PV of debt Ratio of PV of Ratio of PV of Stock 2008 2008 (US$ debt to Gross debt to export

(US$ million) National of goods andmillion) Income services

(per cent) (per cent)1 2 3 4 5 6

1 Russian Federation 402,453 376,764 30 81

2 China 378,245 353,151 10 253 Turkey 277,277 260,994 40 1704 Brazil 255,614 245,974 19 1215 India 230,611 202,963 18 706 Poland 218,022 193,709 46 1037 Mexico 203,984 197,895 20 628 Indonesia 150,851 145,682 35 1029 Argentina 128,285 126,813 48 17110 Kazakhstan 107,595 97,907 106 164

11 Romania 104,943 89,996 57 14912 Ukraine 92,479 89,004 63 12413 Malaysia 66,182 61,632 35 30

4 9 . 5

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i l e

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i a

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i a n F e d e r a t

i o n

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i a

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i s t a n

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Figure 5.2: International Comparison of Ratio of Short-term toTotal External Debt, 2008 (Per cent)


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14 Philippines 64,856 57,964 37 7715 Thailand 64,798 59,181 31 3216 Chile 64,277 58,392 41 74

17 Venezuela 50,229 51,009 21 5818 Pakistan 49,337 35,957 24 12019 Colombia 46,887 44,358 23 10820 Latvia 42,108 39,269 147 301

5.3.4 The international comparison of concessional credit in total external debt shows that India'sshare of concessional credit in total external debt was the fourth highest (20.5 per cent), after Pakistan (60.6 percent), Indonesia (27.9 per cent) and Philippines (23.1 per cent). The share of concessional debt to total externaldebt in top 20 debtor developing countries was in the range of 0.2 per cent to 60.6 per cent (Figure 5.3) .

5.3.5 The Quarterly External Debt Statistics (QEDS) database, jointly developed by the WorldBank and the IMF, brings together detailed external debt data of countries that are subscribing to IMF'sSpecial Data Dissemination Standard (SDDS) / General Data Dissemination System (GDDS). As per thelatest QEDS data available at end March 2010, India ranked at sixth position after China, Russian Federation,Brazil, Poland, Turkey in top seventeen developing debtor countries. The position of external debt, at theend of the first quarter of the calendar year 2010, in respect of highly indebted developing countries, whichare subscribers to this arrangement, as published by the World Bank (http://go.worldbank.org/ GWMYALHYQ0) is given at Annex XIV .

5.4 Summary

5.4.1 International comparison based on World Bank's 'Global Development Finance, 2010' showsIndia's comfortable external debt position vis--vis other developing countries. India's position was fifth in

terms of total external debt stock among the top twenty developing debtor countries in 2008. All the keydebt indicators, especially debt to GNI ratio, debt service ratio, short-term to total external debt and thecover of external debt provided by foreign exchange reserves were in comfortable zone.

1 2 3 4 5 6

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Figure 5.3: International Comparison - Share of ConcessionalDebt in Total External Debt, 2008


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CHAPTER 6

SOVEREIGN EXTERNAL DEBT

6.1 Introduction

6.1.1 In pursuance of a cautious and prudent external debt management policy, the Governmentof India has been borrowing only from the multilateral and bilateral sources. Other debt liabilities of theGovernment include defence debt, investments by Foreign Institutional Investors (FIIs) and other central

banks in treasury bills and dated government securities and Rupee debt owed to Russia. The share of sovereign debt in total external debt has declined over the years, mainly because of the increasing role of

private sector in the countrys economy. This Chapter provides an overview of the magnitude and compositionof sovereign debt, explicit contingent liabilities of the Government, sovereign debt service payments and

projections up to the year 2019-20. An overview of external assistance to States, on back-to-back basis, has been incorporated to make the analysis more comprehensive.

6.2 Composition of Sovereign External Debt

6.2.1 During end-March 2009 and end-March 2010, sovereign external debt (SED) increased byUS$ 11.2 billion (20.0 per cent) from US$ 55.9 billion to US$ 67.1 billion. Table 6.1 presents a break-upof SED into: (i) External Debt on Government Account under External Assistance and (ii) Other GovernmentExternal Debt.

6.2.2 Debt from multilateral sources has dominated Indias SED and remained in the range of 67-70 per cent of external debt on Government account under External Assistance during 2005 to 2010.Amongst the bilateral creditors, the Government owed US$ 12.4 billion to Japan, followed by Germany(US$ 2.5 billion), Russian Federation (US$ 1.7 billion), France (US$ 0.42 billion) and the United States(US$ 0.38 billion) at end-March 2010.

Table 6.1: Indias Sovereign External Debt (US$ million)

At end-MarchSl. No. Category 2005 2006 2007 2008 2009PR 2010QE

1 2 3 4 5 6 7 8

I. External Debt on Govt. Accountunder External Assistance (A+B) 43,686 43,510 46,155 52,541 51,816 55,232

A Multilateral (1 to 5) 29,204 29,997 32,515 36,171 35,724 37,825

Percentage of Multilateral Debt on Govt.Account under External Assistance 66.8 68.9 70.4 68.8 68.9 68.5

1. IDA 23,693 23,418 24,548 26,496 24,758 25,380

2. IBRD 3,771 4,400 5,015 5,662 5,878 6,397

3. ADB 1,410 1,866 2,623 3,650 4,766 5,717

4. IFAD 277 267 280 312 282 288

5. Others 53 46 49 51 40 43

B Bilateral (6 to 11)a

14,482 13,513 13,640 16,370 16,092 17,407 Percentage of Bilateral Debt on Govt.Account under External Assistance 33.2 31.1 29.6 31.2 31.1 31.5


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6. Japan 9,662 8,944 8,720 10,806 11,110 12,442

7. Germany 2,564 2,285 2,445 2,849 2,451 2,4578. United States 790 688 589 512 435 380

9. France 642 554 560 612 472 421

10. Russian Federation 817 1,037 1,321 1,585 1,619 1,702

11. Others 7 5 5 6 5 5

II. Total Other Govt. External Debt (C+D) b 4,011 2,749 3,205 5,529 4,058 11,832

C. Other Govt. External Debt (Long term) 2,852 2,609 2,879 4,914 3,119 10,314

D. Other Govt. External Debt (Short-term) 1,159 140 326 615 939 1,518

III. Total Sovereign External Debt (I+II) 47,697 46,259 49,360 58,070 55,874 67,064 PR: Partially Revised; QE: Quick Estimatesa: Includes rupee debt (civilian).b: Other government external debt comprises rupee debt, IMF SDR allocation and FII investment in government securities.

6.2.3 Figures 6.1 and 6.2 represent the information contained in column 8 of Table 6.1 on theinstitution-wise breakup of multilateral debt and country-wise break-up of bilateral debt. Institution-wise(Figure 6.1), the International Development Association (IDA) accounts for the bulk (67.1 per cent) of themultilateral debt, followed by the International Bank for Reconstruction and Development (IBRD, 16.9 per cent), the Asian Development Bank (ADB, 15.1 per cent), the International Fund for AgriculturalDevelopment (IFAD, 0.7 per cent) and Others (0.11 per cent) that primarily includes the Organization of

Petroleum Exporting Countries (OPEC) ( Annex XV and XVI ). Figure 6.2 shows that Japan dominates asthe single largest bilateral creditor (71.5 per cent), followed by Germany (14.1 per cent) and the RussianFederation (9.8 per cent).

(US$ million)At end-March

Sl. No. Category 2005 2006 2007 2008 2009PR 2010QE1 2 3 4 5 6 7 8

IDA (67.1)

IBRD (16.9)

ADB(15.1)IFAD(0.7) Others (0.1)

Figure 6.1 : Composition of Sovereign Multilateral Debt at end-March 20 10 (per cent)


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6.3 Currency Composition

6.3.1 In contrast to the currency composition of the total external debt, which is dominated by theUS dollar, currency composition of sovereign debt is dominated by the SDR. As at end-March 2010, the

SDR share was 41.7 per cent ( Table 6.2 and Figure 6.3 and 6.4) followed by the US dollar (26.5 per cent),Japanese yen (18.6 per cent), Indian rupee (8.9 per cent) and the Euro (4.3 per cent) ( Annex XVII) .

Table 6.2: Currency Composition of Sovereign External Debt

(per cent)

Sl. Currency at end-March

2006 2007 2008 2009 PR 2010 QE

1 2 3 4 5 6 7

1 SDR 43.0 43.3 40.7 39.5 41.7

2 US Dollar 27.2 27.9 26.6 29.6 26.5

3 Japanese Yen 19.3 17.7 18.6 19.9 18.6

4 Indian Rupee 4.3 4.9 8.0 5.7 8.9

5 Euro 6.1 6.1 6.0 5.2 4.3

6 Pound Sterling 0.1 0.1 0.1 0.1 0.0

Total (1 to 6) 100 100 100 100 100

PR: Partially revised; QE: Quick Estimates.

Japan (71.5)

Germany (14.1)

USA (2.2)

France (2.4)

Russian Federa tion (9.8)

Figure 6.2: Comp osition of Sovereign Bilateral Debt as at end-March 2010 (per cent)


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6.4 Debt Service

6.4.1 Sovereign external debt service payments that were around US$ 2.8 billion during 2006-07

to 2008-09, stood at US$ 3.4 billion during 2009-10 (Table 6.3) . The debt service payments had increasedsharply during 2002-03 and 2003-04, following pre-payments of high cost Government loans to the tune of US$ 2.9 billion in 2002-03 and US$ 3.8 billion in 2003-04 (Annex XVIII) .

SDR (43.0)

US Dollar (27.2)

Japanese Yen (19.3)

Indian Rupee (4.3)

Euro (6.1) Pound Sterling (0.1)

Figure 6.3 : Currency Comp osition of India's Sovereign External Debtas at end-M arch 2006 (per cent)

US Dollar (26.5)

SDR (41.7)

Indian Rupee (8.9)

Japanese Yen (18.6)

Euro (4.3 )

Figure 6.4: Currency Composition of India's Sovereign External Debt at end-March 2010 (per cent)


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31 Table 6.3 : Sovereign External Debt Service Payments

(US$ million)April-March

Sl. No. Debt Service Payments 2004-05 2005-06 2006-07 2007-08 2008-09PR 2009-10QE

1 2 3 4 5 6 7 8

I. Debt Service Payments underGovernment Account (A+B) 2,262 2,272 2,722 2,696 2,719 3,273

A Multilateral (i + ii) 1,044 1,192 1,543 1,738 1,625 1,818

i. Principal 737 790 959 1066 1110 1386

ii. Interest a 307 402 584 672 515 432

B Bilateral (iii +iv) 1,218 1,080 1,179 958 1,094 1,455

iii. Principal 884 776 868 713 793 1084

iv. Interest 334 304 311 245 301 371

II. Other Government Debt ServicePayments (v + vi) 417 572 162 122 101 97

v. Principal 417 572 162 122 101 97

vi. Interest 0 0 0 0 0 0

III. Total Government External Debt

Service Payments (I+II) 2,679 2,844 2,884 2,818 2,820 3,370

vii. Total Principal (i+ iii + v) 2,038 2,138 1,989 1,901 2,004 2,567

viii. Total Interest (ii + iv + vi) 641 706 895 917 816 803

PR: Partially Revised QE: Quick Estimates

Note: Debt service payments on account of FII investment in Government securities are not included.

a: Though IDA loans are interest-free, the associated service charges are treated as interest payments.

6.5 Explicit Contingent Liability

6.5.1 Explicit contingent liabilities refer to obligations that may arise in the event of a default bya borrower on the principal and / or interest of a credit. Sovereign external contingent liabilities relate toguarantees provided by the Government of India for specific loans raised by the non-Government sector from non-residents. The magnitude of contingent liabilities is regularly monitored from the point of viewof its implications for macroeconomic and financial stability.

6.5.2 In accordance with the Fiscal Responsibility and Budget Management Rules, there is anoverall cap of 0.5 per cent of GDP on the quantum of guarantees that the Central Government canassume in a financial year. The Central Government extends guarantees primarily on loans from

multilateral/bilateral agencies to various public sector undertakings/ financial institutions. Governmentguaranteed external debt has remained relatively low, in the range of US$ 6.1-7.7 billion during 2005 to2010 (Table 6.4, Annex XIX) .


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Table 6.4 : Central Government Credit Guarantees on External Debt(US$ million)

at end-MarchSl. No. Component 2005 2006 2007 2008 2009 PR 2010 QE

1 2 3 4 5 6 7 8

1 Govt. Debt 47,697 46,259 49,360 58,067 55,874 67,064

2 Non-Govt. Debt 86,305 92,855 123,000 166,340 168,641 194,390

3 of which with Govt. Guarantee*: (a+b+c) 6,240 6,096 6,107 6,563 6,806 7,677

a. Financial Sector 1,600 1,465 1,446 1,422 1,800 2,253

b. Public Sector 4,484 4,506 4,557 5,040 4,925 5,364

c. Private Sector 156 125 104 101 81 60

4 Total External Debt (1+2) 134,002 139,114 172,360 224,407 224,515 261,454

5 Govt. Debt and Guaranteed Debt (1+3) 53,937 52,355 55,467 64,630 62,680 74,741

6 % o f Govt. Debt and GuaranteedDebt to total External Debt 40.3 37.6 32.2 28.8 27.9 28.6

7 % of Govt. Guaranteed Non-Govt.Debt to total Non-Govt. Debt 7.2 6.6 5.0 3.9 4.0 3.9

PR: Partially Revised; QE: Quick Estimates.* Direct Credit guarantees on non-government external debt provided by the Central Government.

6.6 Projections of Debt Service on Government Account

6.6.1 Total sovereign external debt service payments, based on disbursed outstanding debt as atend March 2010, are estimated to rise gradually from US$ 3.4 billion in 2010-11 to US$ 4.4 billion in2019-20 (Table 6.5). The institution wise break-up of both multilateral and bilateral is contained inAnnex XX .

Table 6.5: Creditor-wise Projections of External Debt Service Payments under Government Account(US$ million)

Sl Components 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019-No. 11 12 13 14 15 16 17 18 19 20

1 2 3 4 5 6 7 8 9 10 11 12

I Multilateral 1,996 2,108 2,293 2,449 2,609 2,731 2,790 2,800 2,846 2,849

a) Principal 1,580 1,683 1,858 2,011 2,173 2,308 2,387 2,422 2,495 2,526

b) Interest 416 425 435 438 436 423 403 378 351 323II Bilateral 1,361 1,341 1,556 1,555 1,544 1,561 1,440 1,459 1,494 1,546

c) Principal 985 958 1,177 1,189 1,191 1,226 1,135 1,179 1,240 1,318

d) Interest 376 383 379 366 353 335 305 280 254 228

e) Total Principal(a+ c) 2,565 2,641 3,035 3,200 3,364 3,534 3,522 3,601 3,735 3,844

f) Total Interest (b+d) 792 808 814 804 789 758 708 658 605 551

III Total debt servicepayments (I+II) 3,357 3,449 3,849 4,004 4,153 4,292 4,230 4,259 4,340 4,395

Note: The projections are based on debt outstanding as at end-March 2010 on Government Account for multilateral and bilateral credit under external assistance. The projections do not include debt service arising out of Committed Undisbursed

Balance (CUB) and fresh borrowings. It excludes debt servicing on account of Defence debt, FII investment in Government securities.


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336.6.2 Figures 6.5 and 6.6 show the institution-wise break-up of debt service projections. Out of the

multilateral debt outstanding, the share of the IDA is high and debt service commitments are the highestover the next ten years. Similar commitments to the IBRD and the ADB are expected to plateau from2016-17 onwards ( Figure 6.5 ). On the bilateral front, debt service payments to Japan (the single largestcreditor) is expected to rise over the next ten years with commitments to other countries expected to declinefrom 2016-17 onwards ( Figure 6.6 ). The projections do not include debt service arising out of CommittedUndisbursed Balance (CUB) and fresh borrowings.

* DoD as on March 31, 2010.

0

200

400

600

800

1,000

1,200

1,400

1,600

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Financial Year

Figure 6.5: Projections of Ex ternal Debt Service Pay ments toMultilateral Creditors ( US$ million)*

IDA IBRD ADB IFAD Others

0

20 0

40 0

60 0

80 0

1000

1200

2010-11 2 011 -1 2 2 012-13 2013-14 20 14-15 2015-16 2016-17 2 017-1 8 2018-19 20 19-20

Financial Y ear

Figure 6.6: Projections of External Debt Service Pay ments to countries (US$ million)*

Japan Russian Federation Germany France USA


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346.7 Central Assistance to State Governments for Externally-aided projects

6.7.1 State Governments in India cannot access external aid directly either through bilateral or multilateral sources. However, on the recommendations of the 12 th Finance Commission, the Governmentof India decided to pass on the external assistance to State Governments on back-to-back basis. Thisarrangement has come into effect from 1 st April 2005, under which the interest cost and the exchange

fluctuation risk are passed on to the States. On the request of the special category States, the oldarrangement of transfer of external assistance as additional central assistance on 90:10 grant and loan basis was restored in 2006.

6.7.2 Table 6.6 contains figures for External Assistance to States on back to back basis betweenend-March 2007 and end-March 2010.The projected debt service up to 2019-20 is contained inAnnex XXI.

Table 6.6 : External Assistance to States (on back to back basis loans) on Government Account

Beneficiary State End -March 2007 End -March 2008 End -March 2009 End -March 2010

(US$ (Rs. (US$ (Rs. (US$ (Rs. (US$ (Rs.Million) Crores) Million) Crores) Million) Crores) Million) Crores)

1 2 3 4 5 6 7 8 9

1. Andhra Pradesh 100.00 431.70 200.70 806.23 247.56 1251.91 579.86 2615.73

2. Bihar 0.10 0.42 117.78 473.12 141.37 714.92 310.43 1400.37

3. Chhattisgarh 0.00 0.00 1.41 5.65 5.84 29.53 14.31 64.57

4. Goa 0.00 0.00 0.00 0.00 0.00 0.00 4.19 18.91

5. Gujarat 0.17 0.74 0.80 3.22 12.58 63.64 28.71 129.51

6. Haryana 0.00 0.00 0.00 0.00 0.00 0.00 27.79 125.38

7. Karnataka 43.74 188.84 89.18 358.25 148.75 752.24 200.59 904.86

8. Kerala 0.00 0.00 60.53 243.13 171.44 866.95 254.72 1149.05

9. Madhya Pradesh 0.00 0.00 62.73 252.00 224.40 1134.77 478.40 2158.06

10. Maharashtra 32.45 140.10 45.55 182.97 74.52 376.86 207.75 937.18

11. Orissa 152.25 657.25 166.26 667.87 257.05 1299.89 300.07 1353.62

12. Punjab 1.05 4.53 93.67 376.27 124.45 629.34 140.09 631.94

13. Rajasthan 0.00 0.00 0.00 0.00 3.05 15.44 17.12 77.22

india external debt 2010e

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