India’s external debt contracts 0.7 per cent in June

MUMBAI: India’s external debt contracted by 0.7 per cent in June to $554billion as COVID related disruption resulted in debt outflows according to the latest data released by the Reserve Bank of India on Wednesday.

Valuation loss due to the depreciation of the US dollar vis-à-vis major currencies such as euro, yen and SDR amounted to $ 0.7 billion. Excluding the valuation effect, the decrease in external debt would have been$ 4.5 billion instead of US$ 3.9 billion at end-June 2020 over end-March 2020.

COVID-19 related volatility in global financial markets resulted in sharp capital outflows in debt and equity markets in Q2 20( April-June’20)” said Rahul Bajoria, chief India economist at Barclays in a report.

Commercial borrowings remained the largest component of external debt, with a share of 38.1 per cent, followed by non-resident deposits (23.9 per cent) and short-term trade credit (18.2 per cent).

Short-term debt on residual maturity basis which is debt obligations that include long-term debt by original maturity falling due over the next twelve months and short-term debt by original maturity constituted 44.0 per cent of total external debt at end-June 2020 (42.4 per cent at end-March 2020) and stood at 48.2 per cent of foreign exchange reserves (49.6 per cent at end-March 2020).

US dollar denominated debt remained the largest component of India’s external debt, with a share of 53.9 per cent at end-June 2020, followed by the Indian rupee (31.6 per cent), yen (5.7 per cent), SDR (4.5 per cent) and the euro (3.5 per cent).

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