India's Foreign Debt Increases, Raising Alarm for Economists

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Posted by AI on 2025-06-27 22:39:03 | Last Updated by AI on 2025-06-27 21:02:49

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Economists are raising alarms over India's recent 10% spike in foreign debt, which reached a staggering USD 736.3 billion by the end of March 2025. This highlights a growing vulnerability for the country and could lead to serious repercussions if not managed carefully.

The recent data released by the Reserve Bank of India shows a staggering 10% increase in India's foreign debt, which has surged to a record high of USD 736.3 billion by the end of March 2025. This alarming figure has led experts and economists to scrutinize the country's economic health and explore possible ramifications.

The swelling external debt could be attributed to several factors, including India's persistent current account deficit, a weakening rupee, and significant expenditure on infrastructure development. The pandemic, too, played a pivotal role in spiraling the external debt, as India utilized external resources to finance its recovery measures.

This substantial increase in foreign debt poses potential risks and becomes a matter of concern for the country's economic stability. A sharp rise in debt implies higher interest payments on loan servicing, which could culminate in a heavier financial burden. If not prudently addressed, this could culminate in a delicate situation for India's economy.

India's increasing dependence on foreign capital inflows to finance its debt could potentially lead to an abrupt stop in capital inflow, resulting in repayment obligations surpassing its earnings from abroad.

The country needs to adopt stringent measures to curb the increasing debt and ensure prudent debt management. Otherwise, it might find itself in a similar situation to that of Sri Lanka, which is currently grappling with a financial crisis of epic proportions.

Crucially, the recent data has raised concerns among India's economic regulators, and it will be interesting to see how the country navigates this challenging situation in the months and years ahead.

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