India cuts US debt exposure by over $4 bn in 3 months

New Delhi: India has lowered its exposure to America’s ballooning debt for three consecutive months, as its holding of the US Treasury bonds fell by $4.2 billion (more than Rs 20,000 crore) between May and July this year.

As per the latest foreign holding data released by the US Treasury Department, Indian holding of the US Treasury bonds - debt securities issued by the world’s largest economy - fell by $1 billion in July to $37.9 billion.

It was the third consecutive month of decline since May, and the longest declining streak since 2010.

At the end of April 2011, India held treasury bonds worth $42.1 billion - close to its record high holding of $42.2 billion in June 2009.

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The Indian holding declined for three months even before the first-ever sovereign rating downgrade of the US in August.

The data for the last month would be released on 18 October.

It was widely feared that many of the US treasury investors, including foreign entities, would have cut their holdings after the downgrade by credit ratings agency S&P. It had cited reasons like inadequate steps by the US to contain ballooning debt for taking the historic action.

The total debt of the US is moving close to $15 trillion, out of which it owes nearly $4.5 trillion to foreign countries that hold US Treasury bonds.

The 3-month decline in the US debt holding by India also happens to be the third longest streak of fall, after the 6-month period of July-December in 2009 and a 5-month decline from January to May of 2008.

Indian holding has fallen to a level last seen in August 2010 ($37.9 billion).

In contrast, a number of other countries including China, the largest foreign holder of the US treasury bonds, raised their exposure in July, as also in previous few months.

However, Indian exposure to the US debt remains higher than countries such as South Korea, Italy, Netherlands, France, Sweden and Australia.

India is ranked as 15th largest foreign holder of the US debt securities after China, Japan, UK, Brazil, Taiwan, Hong Kong, Switzerland, Russia, Canada, Thailand, Singapore, Luxembourg, Germany and Turkey.

In India, the US treasury bonds are mostly held by the Reserve Bank, while some financial institutions and foreign branches of Indian banks also hold some of these securities.

RBI holds the US treasury securities as part of its foreign exchange reserves portfolio.

PTI