India’s External Debt Reaches $624.7 Billion at End-March 2023

India’s external debt has witnessed a slight increase, reaching USD 624.7 billion at the end of March 2023, according to data released by the Reserve Bank. However, the debt-to-GDP ratio has declined during the same period. Valuation gains resulting from the appreciation of the US dollar against major currencies, including the Indian rupee, yen, SDR, and euro, amounted to USD 20.6 billion.

External Debt Growth and Debt-to-GDP Ratio:

The external debt of India rose by USD 5.6 billion compared to the previous year, when it stood at USD 619.1 billion as of March 2022. The Reserve Bank data reveals that the debt-to-GDP ratio decreased from 20 percent in March 2022 to 18.9 percent in March 2023.

Valuation Effects on Debt Calculation:

Valuation gains due to the appreciation of the US dollar against major currencies accounted for USD 20.6 billion. If the valuation effect is excluded, the external debt would have increased by USD 26.2 billion instead of USD 5.6 billion from March 2022 to March 2023.

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, registering a decline of USD 1.1 billion compared to March 2022. The share of short-term debt (with an original maturity of up to one year) in 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 increased from 20 percent in March 2022 to 22.2 percent in March 2023. The largest component of India’s external debt remained the US dollar-denominated debt, accounting for 54.6 percent, followed by debt denominated in the Indian rupee (29.8 percent), SDR (6.1 percent), yen (5.7 percent), and the euro (3.2 percent).

Components of External Debt:

Loans constituted the largest component of India’s external debt, with a share of 32.5 percent, followed by currency and deposits (22.6 percent) and trade credit and advances (19.9 percent). Debt securities also accounted for a portion of the external debt.

Debt Service:

Debt service, which includes principal repayments and interest payments, slightly increased to 5.3 percent of current receipts by the end of March 2023, compared to 5.2 percent in March 2022. This reflects higher debt service obligations.

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