Assets held by Indians overseas declined by $40.1 billion, while the claims of non-residents’ on the country also declined by $29.1 billion, resulting in an increase in the net foreign liabilities of the country by $11 billion to $364.5 billion during the December 2024 quarter.
The fall was primarily due to the valuation effect as the rupee was under tremendous pressure during this period. According to the quarterly numbers relating to the country’s international investment position for December 2024 quarter released by the RBI, net claims of non-residents on the country increased by $11 billion during the reporting period.
The decline in Indian residents’ foreign assets during the period was mainly due to a $70.1 billion decline in the reserve assets, which however increased by $ 13.2 billion over December 2023. The fall in foreign liabilities was due to the decline in inward direct and portfolio investments during the period, though trade credit, loans and currency and deposits recorded an increase, the central bank said.
Reserve assets accounted for 59% of the country’s total international financial assets during the reporting quarter. Variation in the rupee’s exchange rate against other currencies impacted the change in liabilities, when valued in the dollar terms. Meanwhile, the ratio of the international assets to liabilities improved to 74.7 during this period from 73.1 a year ago, while the share of debt liabilities in total external liabilities rose to 53.6% in Q3FY25 from 52.9% in Q2FY25 and 51.2% in Q3FY24.
Meanwhile, the country’s external debt also rose 10.7% to $717.9 billion during this period, from $648.7 billion in December 2023. The external debt to GDP ratio was 19.1, and US dollar-denominated debt remained the largest component, followed by the rupee, the Japanese yen, SDR (special drawing rights held with the IMF to the tune of $12.7 billion), and the euro.
Excluding the valuation effect, the increase in external debt would have been $17.9 billion on-quarter against $5.2 billion during the December 2024 quarter over September 2024 quarter.
"US dollar-denominated debt remained the largest component of external debt, with a share of 54.8%, followed by the rupee (30.6%), Japanese yen (6.1%), SDR (4.7%) and the euro (3%)," te RBI said.
The outstanding external debt of the Central government declined while that of the non-government sector increased, it noted, adding the share of outstanding debt of non-financial corporations in the total external debt was 36.5%, followed by deposit-taking corporations (except the central bank) at 27.8%, Central government (22.1%) and other financial corporations (8.7%).
Loans were the largest component of external debt, with a share of 33.6%, followed by currency and deposits (23.1%), trade credit and advances (18.8%) and debt securities (16.8%), it added.
The cost of debt servicing marginally declined to 6.6% of current receipts from 6.7%. Reserve assets, however, recorded an increase of US$ 13.2 billion over December 2023.