India’s External Debt
- June 26, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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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.