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India faces $41 billion exposure to US debt

India faces $41 billion exposure to US debt
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First Published: Sun, Aug 07 2011. 03 50 PM IST
Updated: Sun, Aug 07 2011. 03 50 PM IST
New Delhi: As one of the 15-largest foreign creditors to the US, India’s exposure to the United States’ ballooning debts is estimated at $41 billion -- higher than the money America owes to countries like France and Australia.
The overall national debt of the US is moving nearer to $15 trillion, out of which it owes over $4.5 trillion to foreign countries holding the US government debt securities.
While China is the single-largest holder of the US treasury securities with $1.15 trillion, India stands at 14th position with $41 billion (about Rs1.83 trillion), as per the US Treasury Department.
The unprecedented debt downgrade of the US from the top-notch AAA level by Standard & Poor’s (S&P) might also lead to an immediate action by Reserve Bank of India (RBI), which allows holding of government debt securities of countries with mostly a ‘Triple-A’ rating.
While a vast majority of the $41 billion portfolio is owned by RBI itself, some Indian banks also might have some exposure, sources said.
They said that the RBI was most likely to allow holding of the US securities even with a notch-lower rating, as it has been itself amassing the US Treasury securities over the past one year despite a deepening debt crisis there.
The Indian holding has grown by about $10 billion in the past one year, the US Treasury data shows.
The RBI holds the US Treasury securities as part of its foreign exchange reserves and the dollar holdings account for about 10% of its total portfolio.
Some experts pointed out that India has been increasing its exposure on the pretext that the US debt bonds were one of the most secure from default risks.
However, the US, which was on the brink of defaulting on its debt obligations last week, was saved by way of a last-minute deal reached by President Barack Obama to raise the country’s $14.3 trillion borrowing ceiling.
Rating agency S&P, which has based its downgrade of the country’s rating on the political opposition to the government plans to fight the debt problems, has termed the rescue plan as inadequate to tackle the US debt situation.
While an exposure of $41 billion is a substantial figure from Indian context, this accounts for less than 0.3% of the US’ total debt and just about 1% of its total foreign debts.
In fact, the Indian exposure is equivalent to an estimated $40 billion worth treasury bonds held by one single entity - Warren Buffett-led Berkshire Hathaway.
The overall foreign holding of the US government securities has grown by about $500 billion in past one year, while China has increased its exposure by about $300 billion during this period.
Among top foreign creditors, China is followed by Japan ($912 billion), the UK ($346 billion), Brazil ($211 billion), Taiwan ($153 billion), Hong Kong ($122 billion), Russia ($115 billion), Switzerland ($108 billion), Canada ($91 billion), Luxembourg ($68 billion), Germany ($61 billion), Thailand ($60 billion), Singapore ($57 billion) and India ($51 billion).
Countries with lower exposure than India include Turkey, Ireland, South Korea, Belgium, Poland, Mexico, Italy, Netherlands, France, Philippines, Norway, Sweden, Colombia, Israel, Chile, Egypt, Malaysia and Australia in the respective order.
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First Published: Sun, Aug 07 2011. 03 50 PM IST
More Topics: US Crisis | India | US Debt | US Treasury | Bonds |