India’s External Debt Surge

April 1, 2025

In December 2024, India’s external debt reached approximately $718 billion. This marked an increase of 10.7 per cent from the previous year. The surge in debt is attributed mainly to non-financial corporations seeking funds for infrastructure projects. The data shows rise in both short-term and long-term debts.

External Debt

India’s external debt rose from around $648 billion in December 2023 to $718 billion by December 2024. This increase of over $69 billion occurred despite a decline in general government debt. The external debt-to-GDP ratio was reported at 19.1 per cent, slightly up from 19 per cent in September 2024.

Components of External Debt

The largest share of external debt is held in US dollars, accounting for 54.8 per cent. Other currencies include the Indian Rupee at 30.6 per cent, Japanese Yen at 6.1 per cent, Special Drawing Rights (SDR) at 4.7 per cent, and Euro at 3 per cent. Loans constitute the largest component of external debt, making up 33.6 per cent.

Short-Term vs Long-Term Debt

Long-term debt, defined as debt with a maturity of over one year, totalled over $578 billion, showing a marginal increase. Conversely, short-term debt rose to 19.4 per cent of total external debt, increasing from 18.9 per cent in the previous quarter. This trend indicates a growing reliance on short-term financing.

Impact of Currency Valuation

The appreciation of the US dollar against the Indian Rupee and other major currencies contributed to a valuation effect of $12.7 billion. If this effect were excluded, the actual increase in external debt would have been $17.9 billion rather than $5.2 billion.

Sectoral Distribution of Debt

The distribution of external debt indicates that non-financial corporations hold the largest share at 36.5 per cent. Deposit-taking corporations follow at 27.8 per cent, while the general government accounts for 22.1 per cent. Other financial corporations represent 8.7 per cent of the total.

Debt Service Obligations

Debt service, which includes both principal repayments and interest payments, was 6.6 per cent of current receipts at the end of December 2024. This is a slight decrease from 6.7 per cent in September 2024, suggesting a stable debt servicing capacity.

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