In the last couple of months, massive depreciation of some currencies has created the buzz, with some experts saying that there high risks to such emerging market economies including India. However, India seems to be doing much better than counterparts Brazil, Russia and Argentina in terms of non-financial debts — domestic, corporate and government debts that are paid in foreign currencies.
India’s debt obligation in foreign currencies as a share of the Gross Domestic Product (GDP) is 15%, slightly higher than China’s 14% but much lower than Russia’s 25%, Brazil’s 26% and Argentina’s 54%. Among the top emerging economies, Turkey’s exposure is highest with 70% foreign currency debt obligation as a share of its GDP, followed by Hungary with 64% and Argentina 54%, as per the New York Times/Institute of International Finance data.
The non-financial debt is the total financial debt owed by households, the government and corporate bodies (both profit and non-profit).
The currency rout began when Turkish Lira witnessed a massive fall, followed by depreciation in other currencies as well, including the Indian rupee. The rupee fell about 13% since the beginning of the year, which many, attributed to the global factors, mainly appreciation in the US dollar.