India’s outstanding external debt stock rose 7% y-o-y to $482.9 billion in April-June, driven mainly by a rise in commercial borrowings, data from the Reserve Bank of India showed.
At this level, external debt as a percentage of the GDP is at 24%, an increase from 23.7% in the previous quarter. The external-debt-to-GDP ratio has been increasing every year since 2010.
External commercial borrowings by private companies rose to $14.47 billion in April-June, a jump of 19% from the previous quarter, indicating that companies are still borrowing large amount from overseas markets. While these borrowings are largely long term, the rising stock could be worrisome for the RBI as unhedged exposures could rise.
According to the RBI, the hedge ratio of Indian companies has improved to around 40% this year compared with just 15% in 2013. Bankers pointed out that incrementally companies are hedging forex borrowings but past loans still continue to be unhedged. Total commercial borrowings that include forex loans by Indian companies, foreign investors’ holdings of onshore rupee debt and a part of loans taken from multilateral agencies was at $185.4 billion as of June 30, an increase of 19% from a year ago.
The country’s short-term debt fell, both sequentially and from a year ago, mainly due to phasing out of foreign investment into treasury bills. Short-term debt was $84.4 billion in April-June, a fall of 6.3% from the corresponding quarter of the previous year.