Key Facts about India’s External Debt

About India’s External Debt:

• At end-March 2024, India’s external debt was US$ 663.8 billion, an increase of US$ 39.7billionover its level at end-March 2023.
• The external debt-to-GDP ratio declined to 18.7 percent end-March 2024 from 19.0 percent at end-March 2023.
• The Valuation effect due to the appreciation of the US dollar vis-à-vis the Indian rupee and other major currencies such as the yen, euro, and SDR amounted to US$ 8.7 billion.
  • Valuation effects are the change in value of assets held abroad with regard to the value of domestic assets held by foreign investors.
  • Excluding the valuation effect, external debt would have increased by US$ 48.4 billion instead of US$ 39.7 billion at end-March 2024 over end-March 2023.
• At end-March 2024, long-term debt (with an original maturity of above one year) was placed at US$ 541.2 billion, recording an increase of US$ 45.6 billion over its level at end-March 2023.
• The share of short-term debt (with an original maturity of up to one year) in total external debt declined to 18.5 percent at end-March 2024 from 20.6 per cent at end-March 2023. 
• Similarly, the ratio of short-term debt (original maturity) to foreign exchange reservesdeclined to 19.0 percent at end-March 2024 (22.2 per cent at end-March 2023).
• US dollar-denominated debt remained the largest component of India’s external debt, with a share of 53.8 percent at end-March 2024, followed by debt denominated in the Indian rupee (31.5 percent), yen (5.8 percent), SDR (5.4 percent), and euro (2.8 percent).
• Outstanding debt of both government and non-government sectors increased at end-March 2024 over the level a year ago.
• The share of outstanding debt of non-financial corporations in total external debt was the highest at 37.4 percent, followed by deposit-taking corporations (except the central bank) (28.1 percent), general government (22.4 percent) and other financial corporations (7.3 percent).
• Loans remained the largest component of external debt, with a share of 33.4 percent, followed by currency and deposits (23.3 percent), trade credit and advances (17.9 percent) and debt securities (17.3 percent).

Debt service (i.e., principal repayments and interest payments) increased to 6.7 percent of current receipts at end-March 2024 from 5.3 percent at end-March 2023, reflecting higher debt service.

Q1: What is Foreign Exchange Reserve?

Foreign Exchange Reserves (also called Forex Reserves) are reserve assets held by a central bank in foreign currencies. Foreign assets comprise assets that are not denominated in the domestic currency of the country. These may include foreign currencies, bonds, treasury bills, and other government securities. Reserves are denominated and expressed in the US dollar, which is the international numeraire for the purpose. RBI is the custodian of the foreign exchange reserves in India.

Source: India’s external debt stands $663.8 billion at end-March 2024, rise of $39.7 billion from year before