India's Domestic Debt set to Rise in 1997/98

By SABYASACHI MITRA

NEW DELHI: India's internal debt will soar to Rs 3,686.81 billion ($103 billion) in 1997/98 (April-March) from Rs 3,349.14 billion in the previous year, budget documents showed February 28.

The documents were released after Finance Minister P Chidambaram presented the 1997/98 budget in parliament. The government has projected market loans of Rs 2,184 billion in 1997/98 against Rs 1,839.76 billion in 1996/97.

Interest payment obligations of the government are estimated to rise to Rs 680 billion in 1997/98 compared with Rs 585 billion in the previous year.

The debt mountain, built by increased government borrowing and interest payments, cast a shadow on the economy, analysts say. But they added that strong economic growth could prevent the nation from walking into a debt trap.

"There is no cause for alarm. Gross domestic product (GDP) is growing faster than the growth in internal debt," Aashish Pitale, an analyst at ICICI Securities in Mumbai told Reuters by telephone.

India's GDP is expected to grow at 6.8 percent in 1996/97 compared with 7.1 percent a year ago.

The government said there was a significant fall in its external debt but added it needed to do more to reduce its indebtedness which continued to be a matter of concern.

The stock of external debt declined to $92.20 billion at the end of 1995/96 (April-March) from $99.01 billion one year earlier, the government said in a status report on external debt presented to Parliament.

India said it ranked fourth behind Brazil, Mexico and China among the world's top debtors in overall terms but ranked itself sixth after these four nations and Indonesia and Russia in terms of present value (PV) of debt that discounted installments of future principal and interest payments. (Reuter)

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