India's external debt totals $345.8 billion. External debt as a percentage of GDP is 20%, while the debt service ratio is 6%. India borrows externally to fill gaps between desired expenditures and domestic resources, maintain a presence in international bond markets, and stabilize exchange rates. India's major external creditors are commercial banks, other governments, and international institutions like the IMF and World Bank. Two-thirds of India's external debt is non-government debt. Rising external debt and current account deficits pose risks to India's foreign exchange reserves and creditworthiness.

1. External Debt of India
Presentation by :
Kruti Gada : Roll no : 21
Group : B - 27

2. External Debt
• Part of the total debt in a country that is owed to creditors outside
the country
• The debtors can be:
– The government
– Corporations
– Private households
• The debt includes money owed to :
– Private commercial banks
– Other governments
– International financial institutions :
• The International Monetary Fund (IMF)
• The World Bank

3. External Debt of India
• Gross Domestic Product : $1.847 trillion
• India’s External Debt : US $ 345.8 billion
• Foreign Exchange Management Act ,1991 ( FEMA )
Debt Burden Indicators Percentages
External Debt to GDP 20.0
Debt Service Ratio 6.0
Foreign Exchanges Reserves
to Total External Debt
85.1
Concessional Debt to Total
External Debt
13.9
Short-term to Foreign Exchange
Reserves
26.6
Short Term to Total External
Debt
22.6

4. Why do India borrow externally?
• Crowding-out effect
• Debt service costs
• To fill gap between desired
expenditure and domestically
available resources
• Low domestic savings
• To maintain a presence in
international bond markets
• Underestimate the risks
associated with un-hedged
foreign currency borrowing
• Government issuing debt in
foreign currencies to stable
exchange rates

5. Creditors Classification
• Multilateral
• Bilateral
• IMF
• Export Credit
• Commercial Borrowings
• NRI Deposits
• Rupee Debt
• Short Term Debt
LONGTERMDBET

6. Creditors Classification
14.6
7.7
1.8
5.8
30.2
16.9
0.4
22.6
Creditors Classification
Multilateral
Bilateral
IMF
Export Credits
ECB
NRI Deposits
Rupee Debt
ShortTerm Debt

7. Borrower Classification
33%
67%
2006
Government Debt
Non-Government Debt
24%
76%
2012
Government Debt
Non-Government Debt

8. CAD’s bad, real bad: and external
debt is looking worse
• Difference between our external earnings and expenses before
capital flows - 4.5 percent of GDP in the fourth quarter of 2011-12
• Foreign debt now exceeds our foreign currency reserves by nearly
$90 billion - No room for complacency
• Reserve Bank’s moves to further increase external borrowing for
short-term capital flows - building up problems for the future –
unless exports can be shored up
• Thus , external debt is looking worse

9. Forex loan paybacks loom
• The relative calm in the currency market may be disturbed to repay
about $8 billion of maturing loans and a likely slowdown of inflows
due to revival of troubles in Europe put pressure on the rupee.
• “ECB redemption will weaken the rupee, but if there is some policy
action being taken on the FDI front by the government, then we
could see some flows to offset the negative bias”
• Foreign loans, including convertible bonds, worth $8 billion, are
estimated to come up for redemption September, while loans worth
$23 billion will have to be repaid by the end of the fiscal
• Equity inflows - Volatile.
• Debt inflows appear to have slowed on bond auction response and
rising hedging costs.

10. International Comparison of
Change in External Debt Stock

11. Effects of External Debt Burden
• Inflation
• Hampers economic Growth
– Fiscal Deficit
– Current Account Deficit
• Foreign Investor expectations
– Reducing FII and FDIs
• Depletion of Foreign exchange reserves
• Impacts credit-worthiness of the country
Larger the debt stock ,
the lower the probability of debt repayment by the our country.
Emphasis should be given to
i. Fiscal Consolidation ii. Priority Sector Investment iii. Micro Finance

13. External Debt
Sustainability

14. Bibliography
• Links :
– www.finmin.nic.in
– World Bank Website
– IMF Website
– http://www.eurojournals.com/finance.htm
• Textbooks :
– Business Environment by Justin Paul
– External Flows and Economic Development by Sanjeev Kumar
Jain , Lokendra Kumawat, Narin Sinha

15. THANK YOU