Commercial borrowings emerged as the largest component of external debt, with its share increasing from 27.8 per cent at end-March 2008 to 28.7 per cent at end-December 2008. Non-resident Indian deposits accounted for 17.5 per cent of the total external debt, followed by multilateral debt (17.
3 per cent), bilateral debt (9.3 per cent), export credit (6.0 per cent) and rupee debt (0.7 per cent). Under the short-term debt, trade related credits at US$ 43.8 billion constituted 92.
1 per cent of total short- term debt and 18.9 per cent of total external debt at the end of December 2008. Government (sovereign) external debt at US$ 56.9 billion al end-March 2008 registered an increase of 17.
8 per cent over end-March 2008 and increased marginally to US$ 57.4 billion at the end of December 2008. However, sovereign debt as per cent of GDP declined from 5.1 per cent in 2006- 07 to 4.
8 per cent in 2007-08 and its share in total external debt fell from 28.2 per cent at end-March 2007 to 25.3 per cent at end-March 2008 and further to 24.8 per cent at end December 2008. In terms of currency composition of external debt, US dollar denominated debt accounted for 53.1 per cent of total external debt at end-December 2008, followed by Japanese yen (15.9 per cent), Indian rupee (15.8 per cent), SDR (9.
3 per cent), and euro (3.8 per cent). In terms of the major debt sustainability indicators, the ratio of foreign exchange reserves to total external debt improved from 116.2 per cent in 2006-07 to 137.8 per cent in 2007-08.
The ratio of concessional to total external debt has continued to decline from 23.1 per cent in 2006 07 to 19.7 percent in 2007-08and further to 18.7 per cent at end-December 2008. The ratio of short- term debt to foreign exchange reserves, which had increased from 14.
1 per cent at end March 2(X)7 to 15.2 percent at end-March 2008, rose further to 18.5 per com al the end of December 2008.
India’s external debt stock stood at US$262.3 billion (Rs. 1,184,998 crore) al end-March 2010 recording an increase of US$37.8 billion over end March 2009 level of US$224.5 billion (Rsl,143,951) crore. Of the total increase, long-term debt accounted for 28.7 billion, while short-term debt was higher by US$9.
1 billion. The continued high external debt burden on India is due to many domestic and external reasons. On the domestic front, (lie most important reasons are: (i) the failure to generate adequate resources from the internal sectors for financing the five year plans, (ii) the need for foreign aid to carry out the different development projects, (iii) failure to utilise the aid properly which resulted in the inability to generate adequate resources for the repayment of debts, and (iv) failure to increase exports sufficiently. As far as the external factors are concerned, the following are worth mentioning: (i) most of the aid received by India was in the form of loans while grants constituted a very small proportion, (ii) After 1991, the proportion of concessional aid has declined and India has to resort increasingly to commercial borrowings and ‘hard’ loans, and (iii) trade barriers and restrictions are imposed by developed countries on imports from India.