India’s External Debt Rises to $663.8 Billion, but Debt-to-GDP Ratio Falls: RBI Report

Mumbai, India – India’s external debt has risen to $663.8 billion as of March 2023, according to the latest report from the Reserve Bank of India (RBI). While this signifies an increase from the previous quarter, the debt-to-GDP ratio has actually fallen, reflecting a positive trend for the Indian economy.

Key Highlights of the Report:

Total External Debt: $663.8 billion as of March 2023, up from $658.8 billion in the previous quarter.
Debt-to-GDP Ratio: 19.9% as of March 2023, down from 20.6% in the previous quarter.
Composition of Debt:
Commercial Borrowings: Account for the largest share (37.9%), followed by NRI deposits (28.3%).
Short-Term Debt: Decreased to 16.8% from 17.4% in the previous quarter.
Long-Term Debt: Increased to 83.2% from 82.6% in the previous quarter.

Factors Contributing to Debt Rise:

The rise in external debt can be attributed to several factors, including:

Increased Borrowing: Corporations and the government have borrowed more from external sources to fund infrastructure projects and economic growth.
Rising Interest Rates: Higher interest rates in the global market have led to increased borrowing costs for Indian entities.
Weakening Rupee: The depreciation of the Indian Rupee against the US dollar has made external debt repayment more expensive.

Positive Implications of Falling Debt-to-GDP Ratio:

Despite the increase in external debt, the decline in the debt-to-GDP ratio indicates that India’s economy is growing faster than its external debt. This suggests that the country is managing its debt burden effectively.

RBI’s Viewpoint:

The RBI remains optimistic about India’s ability to manage its external debt, citing the country’s strong economic fundamentals and prudent debt management policies. The central bank believes that the increasing share of long-term debt in the total external debt portfolio is a positive development, as it provides greater stability and reduces rollover risk.

Looking Ahead:

While the RBI remains confident about India’s external debt situation, the ongoing global economic uncertainty and volatility in the financial markets pose challenges. Continued focus on managing debt levels, fostering economic growth, and maintaining a stable rupee will be crucial in navigating these challenges.

Keywords: India, External Debt, Debt-to-GDP Ratio, RBI, Economic Growth, Global Economy, Financial Markets, Rupee, Borrowing, Interest Rates, Commercial Borrowings, NRI Deposits, Short-Term Debt, Long-Term Debt.