New Delhi: The Reserve Bank of India (RBI) released its latest economic data, revealing significant developments in India's current account deficit (CAD) and external debt. Here are the key highlights:
Current Account Deficit Narrows:
In the first quarter of the fiscal year 2023-24, India's current account deficit (CAD) displayed a notable decrease, standing at USD 9.2 billion, equivalent to 1.1 percent of the Gross Domestic Product (GDP). This marks a substantial improvement from the same period in the previous year, Q1 2022-23, when the CAD was at USD 17.9 billion, accounting for 2.1 percent of GDP. The RBI attributed this narrowing primarily to an elevated trade deficit, reduced net services surplus, and diminished private transfer receipts.
External Debt Situation:
As of June 2023, India's external debt amounted to USD 629.1 billion, indicating a USD 4.7 billion increase compared to the level observed at the end of March 2023. Despite this uptick, the external debt to GDP ratio exhibited a marginal decline, decreasing from 18.8 percent at the end of March 2023 to 18.6 percent at the end of June 2023.
Long-term debt, characterized by an original maturity period exceeding one year, expanded to USD 505.5 billion by the end of June 2023, reflecting a USD 9.6 billion rise compared to the figure reported at the close of March 2023. Concurrently, the proportion of short-term debt, with an original maturity of up to one year, in the total external debt composition decreased from 20.6 percent at the end of March 2023 to 19.6 percent at the end of June 2023. Additionally, the ratio of short-term debt to foreign exchange reserves exhibited a reduction, standing at 20.8 percent as of June 2023, compared to 22.2 percent at the end of March 2023.
When analyzing short-term debt on a residual maturity basis, it constituted 42.8 percent of the total external debt by the end of June 2023, down from 44.0 percent at the end of March 2023, and accounted for 45.3 percent of foreign exchange reserves, as opposed to 47.4 percent at the end of March 2023.
Debt distribution among various sectors showcased non-financial corporations as the largest contributors, accounting for 39.8 percent of the total external debt, followed by deposit-taking corporations (excluding the central bank) at 26.6 percent, general government at 21.1 percent, and other financial corporations at 7.6 percent.
Regarding the components of external debt, loans retained their position as the largest segment, constituting 32.9 percent, trailed by currency and deposits at 22.9 percent, trade credit and advances at 19.0 percent, and debt securities at 16.8 percent.
Debt service, which encompasses principal repayments and interest payments, increased to 6.8 percent of current receipts as of June 2023,
Debt distribution among various sectors showcased non-financial corporations as the largest contributors, accounting for 39.8 percent of the total external debt, followed by deposit-taking corporations (excluding the central bank) at 26.6 percent, general government at 21.1 percent, and other financial corporations at 7.6 percent.
Regarding the components of external debt, loans retained their position as the largest segment, constituting 32.9 percent, trailed by currency and deposits at 22.9 percent, trade credit and advances at 19.0 percent, and debt securities at 16.8 percent.
Debt service, which encompasses principal repayments and interest payments, increased to 6.8 percent of current receipts as of June 2023, compared to 5.3 percent at the end of March 2023. This rise in debt service is indicative of increased debt obligations.
These economic indicators provide valuable insights into India's financial landscape and its ongoing efforts to manage its external debt and current account deficit.
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