India’s external debt at end-June 2023 was placed at $629.1 billion, recording an increase of $4.7 billion over its level at end-March 2023 according to data released by the Reserve Bank of India (RBI) on September 28.
The external debt to GDP ratio declined to 18.6% at end-June 2023 from 18.8% at end-March 2023, the RBI said.
Valuation effect due to the appreciation of the U.S. dollar vis-à-vis the major currencies such as yen and SDR2 amounted to $3.1 billion. Excluding the valuation effect, external debt would have increased by $7.8 billion instead of $4.7 billion at end-June 2023 over end-March 2023.
At end-June 2023, long-term debt (with original maturity of above one year) was placed at $505.5 billion, recording an increase of $9.6 billion over its level at end-March 2023.
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Balance of Payments
Meanwhile, India’s current account deficit (CAD) narrowed to $9.2 billion (1.1% of GDP) in Q1:2023-24 from $17.9 billion (2.1% of GDP) in Q1:2022-23 but it was higher than $1.3 billion (0.2% of GDP) in the preceding quarter, according to the RBI’s data.
The widening of CAD on a quarter-on-quarter basis was primarily on account of a higher trade deficit coupled with a lower surplus in net services and decline in private transfer receipts.
Net services receipts decreased sequentially, primarily due to a decline in exports of computer, travel and business services, though remained higher on a year-on- year (y-o-y) basis.
Net outgo on the income account, primarily reflecting payments of investment income, declined to $10.6 billion in Q1:2023-24 from $12.6 billion in Q4:2022-23, though higher than a year ago.
In the financial account, net foreign direct investment decreased to $5.1 billion from $13.4 billion a year ago.
International Investment Position
Net claims of non-residents on India increased by $12.1 billion during Q1:2023-24 and stood at $379.7 billion as at end-June 2023.
The rise in net claims of non-residents during the quarter was on account of higher rise in foreign-owned financial assets in India ($36.2 billion) when compared with Indian residents’ overseas financial assets ($24.1 billion) according to data released by the RBI.
Increase in reserve assets ($16.6 billion) was the largest contributor to the rise in Indian residents’ foreign assets during April-June 2023, followed by direct investment, loans and trade credit.
Inward portfolio investment ($15.0 billion) and foreign direct investment ($8.9 billion) together accounted for two thirds of the rise in foreign liabilities of Indian residents.
