India’s External Debt Surge

Current Affairs National

Posted by newadmin on 2025-04-02 08:53:32 |

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In December 2024, India’s external debt reached approximately $718 billion, marking a 10.7 per cent increase from the previous year. The surge in debt is primarily due to non-financial corporations seeking funds for infrastructure projects. The rise is evident in both short-term and long-term debts, reflecting an increased reliance on external financing.

India’s external debt grew from around $648 billion in December 2023 to $718 billion by December 2024, adding over $69 billion despite a decline in general government debt. The external debt-to-GDP ratio was recorded at 19.1 per cent, a slight increase from 19 per cent in September 2024. The composition of the debt indicates that US dollars hold the largest share at 54.8 per cent, followed by the Indian Rupee at 30.6 per cent, the Japanese Yen at 6.1 per cent, Special Drawing Rights (SDR) at 4.7 per cent, and the Euro at 3 per cent. Loans continue to be the largest component of external debt, accounting for 33.6 per cent.

Long-term debt, defined as obligations with a maturity exceeding one year, stood at over $578 billion, showing a slight increase. In contrast, short-term debt rose to 19.4 per cent of total external debt, up from 18.9 per cent in the previous quarter. This trend suggests a growing dependence on short-term financing. The appreciation of the US dollar against the Indian Rupee and other major currencies added a valuation effect of $12.7 billion. Excluding this effect, the actual increase in external debt would have been $17.9 billion instead of $5.2 billion.

A sectoral breakdown reveals that non-financial corporations hold the largest share of external debt at 36.5 per cent, followed by deposit-taking corporations at 27.8 per cent. The general government accounts for 22.1 per cent, while other financial corporations represent 8.7 per cent of the total debt. Debt service obligations, which include both principal repayments and interest payments, accounted for 6.6 per cent of current receipts at the end of December 2024. This marks a slight decline from 6.7 per cent in September 2024, suggesting that India’s debt servicing capacity remains stable.

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