Mumbai, Aug 3: The 3.9 per cent depreciation in the value of rupee as against the US dollar from April to August has increased the external debt burden by about Rs 12,000 crore. In contrast, the Indian Rupee had depreciated about only 2 per cent from December 1998 to May 2000 against the Greenback. The status report on external debt in May this year stated the total external debt as $99 billion. The position could have been much worse, had it not been for the appreciation of the rupee against Yen and other currencies.The entire external debt is denoted in US dollars, irrespective of the particular currency it is denominated in. However, since other currencies like the Yen and the Euro too have depreciated vis-a-vis the US dollar, the rupee has strengthened against these currencies. And hence, the total debt has declined by the same ratio. India's external debt is denominated in about 24 different currencies, including SDRs and the Indian Rupee. External debt in the form of US dollars, SDRs, Indian rupee, Japanese Yen and the Deustche Mark together account for about 87 per cent of the external debt.
External debt in the remaining 19 currencies account for the remaining 13 per cent.
The status report on external debt for 1999-00 states that the debt to GDP ratio, which expresses the magnitude of external debt with respect to the GDP or the domestic output has declined to 23.5 per cent in December 1999 from the peak of 41 per cent in 1991-92. Whereas, the debt service ratio, which gives the debt repayment as a percentage of total reciepts has gone down to 18.2 per cent from the 35.3 per cent in 90-91. While the paper states a significant fall in the short-term debt ratio, the definition of short-term debt as used by the North Block is loans with 1-year maturity at the time of contracting.
This is different than the definition by the International Working Group on External Debt Statistics constituted by the World Bank, IMF, OECD and the BIS. This group defines short-term debt by residual maturity, which includes long-term debt obligation falling due within 1 year as well as short-term debt by original maturity. If we consider the repayment of long-term falling due in the present year, the ratio changes drastically.
Another factor, ie., the foreign exchange reserves which stood at $37.4 billion as on May 12 have been on the decline due to their sale by the RBI, in order to arrest the slide in Rupee. But, the level of convertible reserves excluding the SDRs and gold reserves would seem different if allowance is made for the Resurgent India Bond issue.
Also, if invisibles and NRI remittances and such other capital flows, which have been the mainstay of the rise in the forex reserves are taken into account, the situation is not as comfortable as the staus report makes it to be.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.