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India has to repay $172 billion debt by March 2014

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India has to repay $172 billion debt by March 2014
Saturday June 29, 2013

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Short-term debt maturing within a year is now nearly 60 per cent of India’s total foreign exchange reserves.

The U.S. Federal Reserve’s hint that it could roll back its cumulative easy money policy seems to have suddenly increased India’s vulnerability to slowing capital flows in the near future.

In this context, India’s short-term debt maturing within a year would seem to be a matter of concern against the current backdrop of the declining rupee and the U.S. Fed’s possible change of stance on easy liquidity in future.

Short-term debt maturing within a year is considered by experts as a real index of a country’s vulnerability on the debt-servicing front. It is the sum of actual short-term debt with one-year maturity and longer-term debt maturing within the same year.

India’s short-term debt maturing within a year stood at $172 billion end-March 2013. This means the country will have to pay back $172 billion by March 31, 2014. The corresponding figure in March 2008 — before the global financial meltdown that year — was just $54.7 billion. India has accumulated a huge short-term debt with residual maturity of one year after 2008. The figure has gone up over three times largely because this period also coincided with the unprecedented widening of the current account deficit from roughly 2.5 percent in 2008-09 to nearly 5 per cent in 2012-13. Much of this expanded CAD has been funded by debt flows.

This may turn into a vicious cycle.


More pertinently, short-term debt maturing within a year is now nearly 60 per cent of India’s total foreign exchange reserves. In March 2008, it was only 17 per cent of total forex reserves. This shows the actual increase in the country’s repayment vulnerability since 2008.

Theoretically, if capital flows were to dry up due to some unforeseen events and NRIs stopped renewing their deposits with India, then 60 per cent of the country’s forex reserves may have to be deployed to pay back foreign borrowings due within a year.

A lot of the surge in external debt maturing within the next year is on account of big borrowings by Indian corporates during the boom years after 2004. Corporates became quite heady from their initial growth success and stocked up on huge external debts of 5- to 7-years maturity. The repayment clock is ticking for many of them now.

External commercial borrowings are now 31 per cent of the country’s total external debt of $390 billion as of 31 March 2013. Short-term debt with one year maturity is 25 per cent of total external debt. However, total short term debt to be paid back by the end of this fiscal, which includes a lot of corporate borrowings payable by end March 2014, is 44 per cent of the country’s external debt or $172 billion.

Corporates have managed to roll over their foreign borrowings over the past year because of the easy liquidity conditions kept by the U.S. Federal Reserve. But if the Fed’s easy liquidity stance were to reverse, there is no knowing how Indian corporates will pay back their foreign debt at a depreciated exchange rate of the rupee.

In any case, besides meeting its debt repayment obligation of $172 billion by 31 March 2014, India needs another $90 billion of net capital flows to meet its current account deficit projected at 4.7 per cent of GDP by the Prime Minister’s Economic Advisory Council (PMEAC) for the coming fiscal.

The chairman of the PMEAC, C. Rangarajan, told The Hindu that an otherwise manageable CAD may create a perception of vulnerability in the backdrop of the Fed’s latest stance.

The $172 billion that has to be paid back by March 31, 2014, will no doubt add to this growing sense of unease.

India has to repay $172 billion debt by March 2014 - The Hindu
 
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This is g00d. Get rid of the debt quickly. The quicker , the better.

If India can pay off $172 billion in just one year, this will almost halve India's external debt. Maybe India can then return to boom years again.
 
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The figure has gone up over three times largely because this period also coincided with the unprecedented widening of the current account deficit from roughly 2.5 percent in 2008-09 to nearly 5 per cent in 2012-13. Much of this expanded CAD has been funded by debt flows.

This may turn into a vicious cycle.

Here is the root cause, the trade deficit.

Same problem America is having. The USA is also handling their trade deficit by borrowing more money.
 
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Is China willing to lend to India too?

We've got the largest currency reserves in the world by a very big margin, over $3.2 trillion. Anyone who wants to borrow money can come and ask for it, as long as they can afford to pay it back.
 
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We've got the largest currency reserves in the world by a very big margin, over $3.2 trillion. Anyone who wants to borrow money can come and ask for it, as long as they can afford to pay it back.

Don't think that's a fundamental solution. Better to tighten the belt and bite it out for good.
 
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Don't think that's a fundamental solution. Better to tighten the belt and bite it out for good.

Dont bother ......congress has found a better solution. :tup:

Saudi to again hire Indian maids - on reduced salaries

Riyadh, Jun 12 (IANS): Saudi Arabia will resume the hiring of Indian female domestic workers but on less salaries than before, Xinhua reported Wednesday citing the Al Hayat newspaper.

This is part of an agreement recently signed by the two countries' labour ministries, according to Ahmed Al Faheed, under secretary (International Affairs) at the Saudi labour ministry.

He said that the hiring of Indian maids will be resumed soon after it was halted due to conditions imposed by the Indian government.
 
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Didn't you know we have an Oxford educated economist as a PM. He will surely find a way out like giving more subsidies like food security bill of lakhs of crores, mega corruption deals and general Policy paralysis.

God forbid if we want to elect a development oriented, industry friendly person as PM. His growth model is not "inclusive" and will not work outside Gujarat.
 
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Didn't you know we have an Oxford educated economist as a PM. He will surely find a way out like giving more subsidies like food security bill of lakhs of crores, mega corruption deals and general Policy paralysis.

God forbid if we want to elect a development oriented, industry friendly person as PM. His growth model is not "inclusive" and will not work outside Gujarat.

Not to forget that he is a 'polarizing' figure..............besides how can someone who was a chaiwala and rose to become CM of Gujarat possibly know about economics ...........only Oxford educated, and Harvard educated (chiddu) can know economics. Unless you are white or trained by whites, you are not much of anything, are you ?
 
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