India external debt

The increase in India’s external debt at end-September 2010 over end-March 2010 level
was mainly on account of higher commercial borrowings and short-term debt. Taken
together, these
two components contributed over 70 per cent of total increase in India’s external debt. Strong
domestic demand along with the rising interest rate differentials led to higher net inflows of
commercial borrowings. The rising short-term trade credit to India is in line with the increase
in
imports associated with strong domestic economic activity.