March 2016

The external debt to GDP ratio stood at 23.7 per cent at end-March 2016
Indias external debt at end-March 2016 was placed at US$ 485.6 billion.
Commercial borrowings continued to be the largest component of external
debt with a share of 37.3 per cent, followed by NRI deposits (26.1 per cent)
and short-term trade credit (16.5 per cent).
On residual maturity basis, short-term debt constituted about 42.6 per cent of
total external debt at end-March 2016
US dollar denominated debt continued to be the largest component of Indias
external debt with a share of 57.1 per cent at end-March 2016, followed by
Indian rupee (28.9 per cent), SDR (5.8 per cent), Japanese Yen (4.4 per cent)
and Euro (2.5 per cent).
Debt service payments increased to 8.8 per cent of current receipts at end-
March 2016.
Other High Lights
India owed Rs 57,75,685 crores to internal and external lenders in the financial
year 2014-2015 - a whopping 46% of the countrys gross domestic product.
77% of all long-term borrowings made by the government were actually used
to pay back interest and principal on earlier borrowings rather than being
spent on development expenditure
Broken system
 RBI Data Shows Steep Drop In Debt Servicing
Ability Of Indian Firms

The debt burden for Indian companies rose sharply in the third quarter of the
current fiscal, leading to a drop in the ability of these companies to service their
debt. Data released by the Reserve Bank of India on Thursday shows a surprising
drop in the interest coverage ratio of Indian firms, contrary to the belief that the
Indian corporate sector is starting to deleverage, albeit slowly.
The data, which covers a sample of close to 2,800 listed non-government, non-
financial (NGNF) companies, shows a drop in the aggregate interest coverage
ratio from 3.8 times in Q2 FY17 to 2.9 times Q3 FY17. In the comparable quarter
last year, the interest coverage ratio stood at 3 times.
Interest coverage ratio calculates a companys ability to service interest on its
debt by dividing a companys earnings before interest and taxes (EBIT) by the
companys interest expenses during the period. The sharp drop in interest
coverage ratio was also accompanied with a drop in cash coverage ratio from 4.9
times to 3.8 in the same period. Cash coverage ratio measures the liquidity
available to a company for paying interest versus total interest liability.
At the same time, the interest burden of companies as a ratio of sales rose from
4.1 to 4.9.
Interest expenses grew sharply in Q3 2016-17 as compared with the previous
quarter at the aggregate level as well as for the manufacturing and the services
(other than IT) sectors, the central bank said in the press statement
accompanying the data release without attributing a reason to this. Rating
agency executives that BloombergQuint spoke to were unable to immediately
pinpoint a reason for the decline in interest coverage ratio.
On a sectoral basis, the manufacturing sector saw its interest coverage ratio fall
to 3.4 in Q3 FY17 from 4.4 in Q2 FY17, followed by the services sector which saw
a similar drop from 2.6 times in the second quarter of the financial year 2017 to
1.6 times in the third quarter.
Within the manufacturing sector, textiles, motor vehicles and the iron and steel
industries experienced higher growth of interest expenses. In the services (other
than IT) sector, higher interest expenses were attributable to the
telecommunication industry, the RBI said in its release.
The telecommunications sector, which is in the midst of a scenario of increased
competition and consolidation, saw its interest coverage ratio fall below one, the
RBI said. An interest coverage ratio of less than one indicates that the company
doesnt have enough resources to pay back the interest on its existing debt.
This trend of declining interest coverage ratio was observed across companies of all
sizes, according to the RBI data.
The performance in the third quarter appears to reverse trends observed till
September 2016. In the December edition of its Financial Stability Report, the
RBI noted that Indian firms appear to be deleveraging.
During the period of September 2015 to September 2016, 42.2 per cent of
NGNF listed companies in the select sample witnessed deleveraging, while the
total borrowings remained the same for another 17.3 per cent of the
companies, the RBI wrote in its FSR. But the central bank also raised the
alarm on large borrowings by the remaining companies which more than
nullified the effect of deleveraging by other companies.
Though the total borrowings increased for only 40.4 per cent companies, the
growth of total borrowings of such companies was much higher than the
reduction in total borrowings of companies which deleveraged, thus
influencing the total borrowings of the companies in the sample, said the RBI
in its December review.