India’s External Debt

India’s External Debt

SUB: Economy

SEC: External Sector

Overall Debt and Growth:

• Total External Debt: $663.8 billion, an increase of $39.7 billion from March 2023.
• Debt-to-GDP Ratio: Declined to 18.7% from 19.0% in the previous year.

Valuation Effect:

• Impact of Currency Appreciation: The appreciation of the U.S. dollar against the Indian rupee and other major currencies (yen, euro, and SDR) accounted for a valuation effect of $8.7 billion.

Debt Composition: 

• Currency Breakdown:
  • U.S. Dollar-Denominated Debt: Largest share at 53.8%.
  • Indian Rupee-Denominated Debt: 31.5%.
  • Yen: 5.8%.
  • SDR (Special Drawing Rights): 5.4%.
  • Euro: 2.8%.
• Debt Categories:
  • Loans: Largest component at 33.4%.
  • Currency and Deposits: 23.3%.
  • Trade Credit and Advances: 17.9%.
  • Debt Securities: 17.3%.

Sectoral Increase:

• Government and Non-Government: Both sectors saw an increase in outstanding debt over the year.

Implications and Observations:

• Economic Management: The decline in the debt-to-GDP ratio suggests effective management of external debt relative to economic growth.
• Currency Risk: The significant proportion of U.S. dollar-denominated debt highlights exposure to currency risk, particularly fluctuations in the value of the dollar.
• Loan Dependency: Loans as the largest component of external debt indicate a reliance on borrowed funds for economic activities.

Public Debt

• Public debt refers to the total amount of money that a government owes to external creditors and domestic lenders.
• India’s Public Debt: Comprises all obligations of the Union government that are required to be settled using funds from the Consolidated Fund of India.

Main Types:

• External Debt: The portion of a country’s debt owed to foreign creditors, including foreign governments, international organizations, and private entities outside the country.
• Characteristics: Subject to exchange rate fluctuations and international economic conditions.
• Internal Debt: Debt owed to lenders within the country, including individuals, banks, and other domestic institutions.