India’s foreign reserves have gone up, so has its debt

India’s total foreign reserves have risen but the debt and other liabilities have also shot up. As per a DBS report, despite a rise in foreign reserve, India’s Net International Investment Position (NIIP) was in red due to foreign debt.

The research note read that the country’s total foreign reserves slipped to USD 346 billion by late-February, down about USD 8.6 billion from its record peak in mid-2015.

Domestically, India was at comfortable metrics but owing to rise in foreign debt, it was in red.

NIIP widened from USD 63 billion in March 2007 to USD 368 billion in March 2015.

On the assets side, reserves amounted to USD 343 billion by March 2015. But this was counterbalanced by a sharp rise in liabilities in the form of portfolio inflows and short-term credits.

"Even as the focus has been on building buffers against external headwinds, its composition could be at risk if the global environment worsens," DBS said.

The report said the government is taking efforts to correct this imbalance as it aims to boost non-debt creating flows, primarily direct investments, to lend a hand to domestic investment cycle and fund crucial infrastructure projects.

(Image: Indiatimes)