Understanding India's External Debt: Key Insights for 2024

Current Status of India’s External Debt

As of the end of March 2024, India’s external debt stands at $663.8 billion. This represents an increase of $39.7 billion compared to March 2023. This growth reflects various economic factors influencing India's financial landscape.

External Debt to GDP Ratio

The external debt to GDP ratio has seen a slight decrease, falling to 18.7% from 19.0% between March 2023 and March 2024. This drop indicates a marginal improvement in the country's economic stability relative to its debt levels.

Valuation Effect on External Debt

The valuation effect, primarily attributed to the appreciation of the US dollar against the Indian rupee and other currencies, amounted to $8.7 billion. Without this effect, the increase in external debt would have been $48.4 billion instead of $39.7 billion.

Main Sources of India’s External Debt

India's external debt consists of various currencies, with the following breakdown:

• US dollar-denominated debt: 53.8%
• Indian rupee-denominated debt: 31.5%
• Yen: 5.8%
• Special Drawing Rights (SDR): 5.4%
• Euro: 2.8%

Types of External Debt

External debt can be categorized as follows:

• General Government Debt: Increased by 11.5% year-on-year.
• Households and Nonprofit Institutions: Declined by 16.5%.
• Non-Financial Corporations: Holds the largest share at 37.4% of total external debt.

Debt Composition Breakdown

The composition of India’s external debt is as follows:

• Loans: 33.4%
• Currency and Deposits: 23.3%
• Trade Credit and Advances: 17.9%
• Debt Securities: 17.3%

Key Points

To summarize, India’s external debt is primarily denominated in US dollars. Loans make up the largest portion of this debt. Additionally, while general government debt has increased, household debt has seen a decline.

Frequently Asked Questions (FAQs)

Q1. What is the total amount of India’s external debt as of March 2024?
Answer: As of March 2024, India’s external debt is $663.8 billion, reflecting an increase from the previous year.

Q2. How much did the valuation effect impact India’s external debt?
Answer: The valuation effect due to the appreciation of the US dollar amounted to $8.7 billion, reducing the apparent increase in external debt.

Q3. What is the external debt to GDP ratio for India in 2024?
Answer: The external debt to GDP ratio decreased to 18.7% as of March 2024, down from 19.0% in the previous year.

Q4. Which currency constitutes the largest share of India’s external debt?
Answer: US dollar-denominated debt constitutes the largest share at 53.8% of India’s external debt.

Q5. How has general government debt changed in the last year?
Answer: General government debt has increased by 11.5% year-on-year as of March 2024.

UPSC Practice MCQs

Question 1: What was India’s external debt at the end of March 2024?
A) $663.8 billion
B) $623.8 billion
C) $703.8 billion
D) $543.8 billion
Correct Answer: A

Question 2: What is the external debt to GDP ratio as of March 2024?
A) 17.5%
B) 19.0%
C) 18.7%
D) 20.0%
Correct Answer: C

Question 3: What was the valuation effect on external debt in 2024?
A) $8.7 billion
B) $10.7 billion
C) $5.7 billion
D) $3.7 billion
Correct Answer: A

Question 4: Which currency makes up the largest portion of India’s external debt?
A) Euro
B) Indian Rupee
C) US Dollar
D) Yen
Correct Answer: C

Question 5: By what percentage did general government debt increase year-on-year?
A) 5.5%
B) 11.5%
C) 16.5%
D) 10.5%
Correct Answer: B