Responding to supplementals in the Lok Sabha on Friday, Sinha said the Government was following a prudent external debt management policy and there was no fear of the country going the Mexican way with the external debt service burden coming down.

However, former finance minister P Chidambaram challenged his claim and asked where was the need then to go for Resurgent India Bonds at 14.8 per cent interest cost.

Responding, Sinha said the bonds were floated to tap the enthusiasm shown by non-resident Indians after the country conducted nuclear tests and the State Bank, which floated them, could mop up $4 billion within 14 working days through them.

The minister informed the House that the debt service ratio declined from 35.3 per cent in 1990-91 to 19.5 per cent in 1997-98 and the debt-GDP ratio from 37.7 per cent in 1991-92 to 23.8 per cent in1997-98.

The external debt, in absolute terms, increased from $83.80 billion at March-end 1991 to $95.20 billion at September-end 1998.

However, the minister said there was considerable increase in internal debt due to recurring fiscal deficit. The government's domestic debt and other internal liabilities, in absolute terms, rose from Rs 2,83,032 crore at March-end, 1991 to projected Rs 810,912 crore at March-end 1999.

Giving details, the minister said market loans totalling Rs 265,952 crore accounted for the biggest chunk of the domestic debt. The other heads of the domestic debt are: 91 days treasury bills Rs 107,519 crore; small saving schemes Rs 142,851 crore; provident fund Rs 51,721 crore; other accounts Rs 135,512 crore; reserve funds and deposits Rs 43,720 crore and other internal debt Rs 63,637 crore.