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Wednesday, September 30, 2009

External debt at US$ 227.7 billion

Current account deficit at US $ 5.8 billion

India's external debt stood at US$ 227.7 billion at the end of June 2009. The increase in external debt by US$ 3.7 billion over end-March 2009 level was mainly due to increase in long term external debt, particularly Non-Resident Indian (NRI) deposits. The share of US dollar denominated debt in the total external debt declined to 54.4 % as at end-June 2009 from 56.3 % as at end-March 2009. The share of non-Government debt in the total external debt declined marginally to 74.8 % as at end-June 2009 from 75.5 % as at end-March 2009. On other hand, the external commercial borrowing for April-June 2009 stood lower at US$ 2.7 billion as compared with US$ 3.8 billion for the corresponding quarter of the previous year.

On other hand, decline in exports which started since October 2008 continued during the first quarter of 2009-10. Import payments, on a BoP basis, also continued its declining trend mainly due to lower oil import bill. Despite net invisibles surplus, the large trade deficit mainly on account of sharp decline in exports led to a current account deficit of US$ 5.8 billion in Q1 of 2009-10.

The gross capital inflows to India revived during Q1 of 2009-10 as compared to the last two quarters of 2008-09 manifesting confidence in India's long-term growth prospects. The gross inflows were, however, at US$ 78.5 billion as compared to US$ 90.9 billion in Q1 of 2008-09 mainly led by inflows under FIIs, FDI and NRI deposits With the revival in capital inflows to India, particularly foreign investments, the capital account showed a turnaround from a negative balance in last two quarters of 2008-09 to a positive balance of US$ 6.7 billion during Q1 of 2009-10 (US$ 11.1 billion in Q1 of 2008-09).

Net capital inflows, however, was lower in Q1 of 2009-10 as compared to that in the corresponding period of last year mainly because of large net outflows under short-term trade credits and banking capital. During Q1 of 2009-10, FDI to India was channeled mainly into manufacturing sector (19.2 %), real estate activities (15.6 %), financial services (15.4 %), construction (12.2 %) and business services (11.7 %). Mauritius continued to be the major source of FDI during Q1 of 2009-10 with a share of 48.9 % followed by USA at 12.8 %.

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