India Development News & Foreign Investment Opportunities

Foreign owned assets increased by US$35bn boosted by FDI

External debt was US$557.4bn

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External debt was US$557.4bn

 

Foreign owned assets in India increased by US$35 billion, mainly on account of an increase in foreign direct investment (US$18.1 billion), portfolio investment (US$6.8 billion) and loans (US$5.9 billion), said the Reserve Bank of India in a April-June 2019 quarterly report.

Foreign assets of Indian residents rose by US$20.2 billion during the quarter, primarily on account of increase in reserve assets, said RBI in a release on data relating to India’s International Investment Position at end-June 2019.

Net claims of non-residents on India increased by US$14.8 billion during April-June 2019, said RBI on 30 Sept 2019.

Appreciation of the Indian rupee against the US dollar during the quarter contributed to the increase in India’s liabilities when valued in US dollar terms; excluding this valuation effect, India’s liabilities would have amounted to US$1,110.4 billion as against US$1,113.9 billion inclusive of valuation.

Reserve assets accounted for 64.9% of total overseas assets, said RBI

The share of debt liabilities in total liabilities declined marginally to 50.6% from 50.9% in the Jan-March ended quarter.

At end-June 2019, India’s external debt witnessed an increase of 2.6% over its level at end-March 2019, primarily on account of an increase in commercial borrowings, non-resident deposits, and short-term trade credit.

The increase in external debt was also contributed by valuation losses resulting from the depreciation of the US dollar against Indian rupee and other major currencies, said RBI.

The external debt to GDP ratio remained at 19.8% at end of April-June quarter, the same as its level at quarter ended March 2019.

Major highlights pertaining to India’s external debt at end-June 2019 are presented below:

At end-June 2019, India’s external debt was placed at US$557.4 billion, recording an increase of US$14.1 billion over its level at end-March 2019 (Table 1).

Valuation losses due to the depreciation of the US dollar vis-à-vis Indian rupee and other major currencies were placed at US$1.7 billion. Excluding the valuation effect, the increase in external debt would have been US$12.4 billion instead of US$14.1 billion at end-June 2019 over end-March 2019.

Commercial borrowings remained the largest component of external debt, with a share of 38.4%, followed by non-resident deposits (24%) and short-term trade credit (18.7%).

At end-June 2019, long-term debt (with original maturity of above one year) was placed at US$447.7 billion, recording an increase of US$12.8 billion over its level at end-March 2019.

The share of short-term debt (with original maturity of up to one year) in total external debt declined to 19.7% at end-June 2019 from 20% at end-March 2019; the ratio of short-term debt (original maturity) to foreign exchange reserves declined to 25.5% at end-June 2019 (26.3% at end-March 2019).

Short-term debt on a residual maturity basis (i.e., debt obligations that include long-term debt by original maturity falling due over the next 12 months and short-term debt by original maturity) constituted 43.2% of total external debt at end-June 2019 (43.3% at end-March 2019) and stood at 56% of foreign exchange reserves (57% end-March 2019).

US dollar denominated debt continued to be the largest component of India’s external debt, with a share of 51.5% at end-June 2019, followed by the Indian rupee (34.7%), yen (5.1%), SDR (4.7%) and the euro (3.2%).

The borrower-wise classification shows that the outstanding debt of both government and non-government sectors increased at end-June 2019.

The share of outstanding debt of nonfinancial corporations in total external debt was the highest at 41.6%, followed by deposit-taking corporations (except the central bank) (29.8%), general government (19.2%) and other financial corporations (6.2%).

The instrument-wise classification shows that the loans were the largest component of external debt, with a share of 34.9%, followed by currency and deposits (24.5%), trade credit and advances (19.2%) and debt securities (17.1%).

Debt service (principal repayments plus interest payments) declined to 5.8% of current receipts at end-June 2019 as compared with 6.4% at end-March 2019, reflecting lower repayments of commercial borrowings, said RBI. fiinews.com

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