External Commercial borrowings dip 64% in 2008-09
New Delhi: Funds raised by India Inc as external commercial borrowings declined by 64 percent during 2008-09 on account of tight liquidity in the global markets triggered by collapse of Lehman Brothers.
The net ECB flows in the country declined sharply to USD 8.2 billion in 2008-09 against USD 22.6 billion in 2007-08, the Finance Ministry said in its report 'India's External Debt: A Status Report'.
ECBs funds, the report said also became expensive on account of tight liquidity conditions in the international financial markets, it said.
Short-term trade credit flows (net) turned negative at USD 5.8 billion as compared with an inflow of USD 17.2 billion a year ago.
Banking capital, excluding NRI deposits also recorded
an outflow of USD 7.7 billion in 2008-09 while there was a net
inflow of USD 11.6 billion under this head in 2007-08.
At the same time, India's external debt rose marginally
by 2.4 percent at USD 230 billion during 2008-09 against 31
percent in the previous fiscal.
External debt stock recorded an increase of USD 5.3
billion (2.4 percent) during 2008-09 as compared with an
increase of USD 53.2 billion (31.1 percent) during 2007-08,
the report said.
"The lower rate of rise in India's external debt during
2008-09 was on account of valuation effect attributed to
appreciation of the US dollar vis-à-vis other major
international currencies, and moderation in debt components,
particularly commercial borrowings and short-term trade
credits reflecting the impact of tightness in international
capital markets due to the crisis," it said.
The government (Sovereign) external debt declined to USD
54.9 billion as at end-March 2009 from USD 56.9 billion at
Its share in total external debt was lower at 23.9 percent as at end-March 2009 (25.4 percent at end-March 2008),
it said, adding, government guaranteed external debt was
marginally up to USD 6.8 billion at end-March 2009 (USD 6.6
billion at end-March 2008).
The government debt and government guaranteed debt
aggregated to USD 61.7 billion at end-March 2009, accounting
for 26.8 percent of total external debt, it said.
The report also noted that depreciation in the Rupee
exchange rate against major international currencies in
2008-09 resulted in higher debt service payments in Rupee
A picture of India's external debt compared with other
developing countries for the year 2007, as brought out by the
World Bank’s Global Development Finance, 2009 indicates that
India was the fifth most indebted country amongst the top
twenty debtor countries of the developing world in 2007.
In terms of foreign exchange cover of external debt, the
report said, India’s position was the fifth highest at 125.2
percent after China, Malaysia, Thailand and Russia.
Outlining the policy initiative undertaken during
2008-09, it said significant policy initiatives were taken
relating to external commercial borrowings, short-term trade
credits and non-resident deposits.
The policy measures relating to external commercial
borrowings indicated a move towards liberalisation in terms of
expanding the list of eligible borrowers, easing all-in-cost
ceilings, relaxations in end-use stipulations, etc, it said.
The all-in-cost ceiling applicable to short-term trade
credits was raised, taking into account higher cost of funds
in international capital markets. The interest rates on NRI
deposits were also raised to counter the effect of global
financial crisis on debt flows to India, it said.
The ceilings on investment of FIIs in government
securities and corporate bonds were also enhanced during the
year. These measures were possible due to comfortable external
debt position of the country, it added.