India's Debt Situation at present can be best understood, if one studies the existing condition of Indian external debts. In fact, India's debt situation focuses on the total amount of external debts taken by the nation on a particular year, its repayments as well as the outstanding debt amounts, if any.
Indian debt situation: The general trend
World Bank considered the Indian subcontinent to be the 3rd most indebted country in the year 1991. On 2002 December, the total external debt of India comprised government debts worth $42 billions, private sector debts worth $30 billion and the deposits coming from the NRI classes. As per the World Bank data, the nation was the 9th most indebted one in 2001. This indicates that the debt situation in India had rather worsened with years, instead of showing signs of improvement. This is precisely why deposits from the NRI sections had seen an overall increase of $32.6 billion from $31.2 billion in India, in the 2004-05 financial year.
The Indian external debt condition became all the more riskier in 2006, when it declined making the country hold 29th position in the world. In 2006, the nation received external debts worth $132.1 billion.
Condition of Indian external debts in 1991:
In the middle of 1991, the exchange rate in India faced serious fiscal adjustments. This modification started at a time when there was a decline in the value of Rupee, continuing for a considerable time period. This was followed by a slackening down of the value of Rupee by the concerned Reserve Bank of India authorities. They made use of the global financial reserves or external debts to cover up this financial deficit.
India's external debts: The 2006 facts and figures
In 2006, the external debts of India soared up to about $132.1 billions, during the April-June quarter. This massive rise in the external debts only reveals the country's desire to raise and accumulate more and more foreign capitals. This was followed by a $5.4 billion rise in the foreign commercial borrowings in a single quarter, as reflected in the data available from the Reserve Bank of India.
In the total Indian external debts, concessional debt has a considerable share, which fell to 30.2% in June from 31.5% in March. This ratio was about 45.9% towards the close of March 1991, which denoted that there was indeed a slow escalation in the share of the non-concessional private debt, within the total stock of Indian external debts.
Majority of the Indian external debts came as US dollars, which accounted for 46.1% of total external debt of the nation.
However, external bilateral debt worth $59.2 million was pre-paid in 2006.
Causes responsible:
The remarkable increase in the Indian external debt in 2006 can be attributed partially to the Reserve Bank of India (RBI) and the decline in the ECB stocks, towards the end of March. 2006. Though the reserves of Indian foreign exchange surpassed the total amount of external debts by about $30.8 billion, yet it was able to make up for only 123.3% of the total external debts, towards the close of June 2006.
Indian debt situation in 2007:
The condition of India's external debts have further worsened in 2007, compared to the previous financial years. Today, the total outstanding loan on the Indian government is worth 41.57 billion US dollars, among which some portions belong to global financial organizations and some are meant for bilateral financial assistances. The actual breakdown of the outstanding loan amounts is stated below:
World Bank will receive 25.49 billion dollars
14.05 billion dollars will go to the bilateral assistances
In an nutshell, the external debt condition in India declined from March 2006 to March 2007 when the debt stock increased from US$126.5 billions (2006) to US$ 155.0 billions (2007). In 2007, the accumulation of debt worth US$ 28.2 billions represented an escalation of 22.6%.