Short-Term Debt a Recipe for Long-Term Disaster

..........At the height of the 1991 crisis — when India’s foreign exchange reserves could barely cover six weeks of imports — the proportion of short-term debt to foreign exchange reserves was 146.5% and short-term debt to total debt was 10.2%, while the debt service ratio was 35%. In the decade that followed, this was reversed as the government and the RBI put a lid on short-term debt, granting approvals only for trade credit, raising maturities for foreign borrowings by Indian corporates by insisting on minimum tenures and a policy bias in favour of more enduring flows such as direct investments and building up foreign exchange reserves................

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