MUMBAI (Commodity Online): With India's total external outstanding debt more than doubling to $327 billion in the last 5 years, the Indian economy is becoming increasingly exposed to external vulnerabilities, a report by Macquaire states.
As certain short-term debts mature this year, India will find it difficult to refinance these debts in this environment of global de-leveraging. And the rising external debt has meant that even though India has a comfortable foreign exchange reserves of $301 billion, it will cover only 95% of external debt as of Sep '11 as compare to 138% in Mar '08
“Since September 2009, of the total US$151 billion of capital flows that India has received, more than 75% of these have been in the form of non-FDI flows that are largely unstable and driven by the overall market sentiment. Considering the global growth uncertainty, we believe that any sudden stop or reversal in flows can result in increasing macro stability risks to fund the rising current account deficit, resulting in BoP (Balance of Payment) stress in the near term”, the report states.
Macquire sees the Indian Rupee to weaken further by 3-5% to around the 55-56 level and expects the Rupee to remain weak and average around 51 in 2012.
Indian GDP growth is estimated to approximate to 7.1% in FY 2012 followed by a drop to 6.9% in FY 2013.
