India gears up to repay debt of $256 billion |
The Indian economy has so far braved the Covid-19 pandemic challenges. But, analysts expect severe pressure as India`s external debt worth $256 billion matures over the next 12 months. India`s Finance Ministry said debt coming up for repayment the year is about 43 percent of the external debt outstanding at $596 billion. India`s foreign exchange reserves are at the highest-ser and more than $600 billion. Yet, there could be short-term pressures on the currency as the RBI is likely to temper its interventions rather than defend the currency. With the recent US consumer price inflation of 7 percent at a 39 year high, the US Federal Reserve might hike rates sooner than anticipated, resulting in higher pull out of dollars from emerging markets including India. The country is still in a comfortable position with reserves adequate to fund over 12 months` imports and this short-term debt. Though reserves position is comfortable compared to 2013, they may not grow as much, or as consistently, as they have in the last couple of years. India added only $48 billion to its stock of reserves in 2021 compared to $124 billion in 2020. Economists are also bracing for an overall balance of payments deficit after almost twelve quarters in March 2022 as crude and commodity prices continue to rise. Moreover, India faces a double blow with rising funding costs as interest rates are set to rise as also higher amounts of dollar funds as the CAPEX cycle is set to pick up.
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