India’s External Debt – Increase with Declining Debt-to-GDP Ratio

According to recent data from the Reserve Bank, India’s external debt has slightly risen to USD 624.7 billion as of March 2023. However, during the same period, the debt-to-GDP ratio has actually decreased. This increase in external debt is partly due to valuation gains resulting from the appreciation of the US dollar against major currencies, which amounted to USD 20.6 billion.

Growth in External Debt and Debt-to-GDP Ratio

Compared to the previous year, India’s external debt has grown by USD 5.6 billion, reaching USD 624.7 billion in March 2023. However, the debt-to-GDP ratio has improved, declining from 20 percent in March 2022 to 18.9 percent in March 2023.

Impact of Valuation Effects on Debt Calculation

Valuation gains caused by the rise of the US dollar against major currencies have contributed USD 20.6 billion to the total debt. Excluding these valuation effects, the actual increase in external debt between March 2022 and March 2023 would have been USD 26.2 billion.

Composition of External Debt

As of March 2023, long-term debt (with an original maturity of over one year) amounted to USD 496.3 billion, showing a decrease of USD 1.1 billion compared to March 2022. In contrast, the share of short-term debt (with an original maturity of up to one year) in the total external debt increased from 19.7 percent in March 2022 to 20.6 percent in March 2023.

The ratio of short-term debt (original maturity) to foreign exchange reserves also experienced a rise, reaching 22.2 percent in March 2023, up from 20 percent in March 2022. The largest component of India’s external debt continues to be the US dollar-denominated debt, accounting for 54.6 percent, followed by debt denominated in Indian rupees (29.8 percent), SDR (6.1 percent), yen (5.7 percent), and the euro (3.2 percent).

Components of External Debt

Loans make up the largest portion of India’s external debt, representing 32.5 percent, followed by currency and deposits (22.6 percent), and trade credit and advances (19.9 percent). Debt securities also contribute to the overall external debt.

Debt Service

The debt service, including principal repayments and interest payments, has slightly increased to 5.3 percent of current receipts by the end of March 2023, compared to 5.2 percent in March 2022. This indicates a higher level of debt service obligations.

India’s External Debt – FAQs

Q1: What are valuation gains, and how have they affected India’s external debt?

Ans: Gains in value are the outcome of the US dollar’s strengthening position relative to other major currencies. In this instance, the total external debt was USD 20.6 billion, or valuation gains.

Q2: What is the composition of India’s external debt?

Ans: While short-term debt (with an original maturity of up to one year) accounts for 20.6 percent of the total external debt, long-term debt (with an original maturity of over one year) totals 496.3 billion USD.

Q3: Which currencies dominate India’s external debt?

Ans: 54.6 percent of India’s external debt is denominated in US dollars, followed by debt in Indian rupees (29.8 percent), SDR (6.1 percent), yen (5.7 percent), and euro (3.2 percent).


  • Pritipalit

    Priti Palit, an accomplished edtech writer, boasts a wealth of experience in preparing candidates for multiple government exams. With a passion for education and a keen eye for detail, she has contributed significantly to the field of online learning. Priti's expertise and dedication continue to empower aspiring individuals in their pursuit of success in government examinations.

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