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External Debt

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At a point in time, Gross External Debt, is defined as the outstanding amount of those actual current liabilities, that require payment(s) of principal and/or interest by the debtor, in the future as per the terms laid out in the contract between the debtor and the creditor and that are owed to non-residents by the residents of the economy.

The definition of gross external debt includes debt incurred by both the Government and the private sector(s) of the economy but does not take into account contingent liabilities that are liabilities arising in the event of specific occurrences covered by the debt contract viz. default by a debtor on the principal and/or interest of a credit.

In India, (Gross) External Debt is classified primarily into the following heads:

(i) Original and Residual (Remaining) Maturity; Original Maturity is defined as the period encompassing the precise time of creation of the financial liability to its date of final maturity while Residual (or Remaining) Maturity includes short term debt by ‘Original Maturity’ of up to one year and long-term debt repayment by ‘Original Maturity’ falling due within the twelve month period following a reference date.

(ii) Long and Short Term Debt; Long Term Debt is defined as debt with an ‘Original Maturity’ of more than one year while Short Term Debt is defined as debt repayments on demand or with an ‘Original Maturity’ of one year or less.

Long-Term debt is further classified into (a) Multilateral Debt (b) Bilateral Debt (c) ‘IMF’ signifying SDR allocations to India by the IMF (c) Export Credit (d) (External) Commercial Borrowings (e) NRI Deposits and (d) Rupee Debt. Short Term Debt is classified into (a) Trade Credits (of up to 6 months and above 6 months and up to 1 year) (b) Foreign Institutional Investors’ (FII) Investment in Government Treasury-Bills and Corporate Securities (c) Investment in Treasury-bills by foreign Central Banks and International Institutions etc. and (iv) External Debt liabilities of the Central Bank and Commercial Banks.

(iii) Sovereign (Government) and Non-Sovereign Debt; Sovereign Debt includes (a) External Debt outstanding on account of loans received by the Government of India (GoI) under the ‘External Assistance’ programme and the civilian component of Rupee Debt (b) Other Government debt comprising borrowings from the IMF, defence debt component of Rupee Debt and foreign currency defence debt and (c) FII investment in Government Securities. All remaining components of External Debt get categorized as Non-Sovereign External Debt.

Multilateral Debt includes debt from Multilateral Creditors that primarily are Multilateral Institutions such as the International Development Association (IDA), International Bank for Reconstruction and Development (IBRD), Asian Development Bank (ADB) etc. Bilateral Debt includes debt from sovereign countries with whom sovereign and non-sovereign entities enter into one-to-one loan arrangements. Japan and Germany are the two major bilateral creditors in the case of India.

Apart from the above classifications, publications disseminating data on External Debt also provide information on the borrower-wise, instrument-wise and currency composition of such Debt.


References

  1. http://www.finmin.nic.in


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