External Commercial Borrowing (ECB) India vs other emerging economies

Abstract

This paper is focused on external commercial borrowing (ECB) as a major component in the external debt book of India. The paper is divided into four major sections. Starting with the external commercial borrowing in general, it enlists the classification and guidelines provided by RBI. It then analyses the advantages/disadvantages for an economy and the borrowers. Finally, it describes the trends in the last 10 years for India as well as other developing economies. The second section extensively focuses on the reasons for the huge surge in ECB in India in last decade and tries to explain whether the reasons are only domestic or there is a generic pattern in all developing countries. The third section provides three tests for hypothesis to find the impact of exchange rate, GDP growth and interest rate differential on ECB. The paper concludes with current issues faced by economy as well as borrowers going forward.