India's Debt-GDP Ratio Dips To 18.7 Per Cent In March 2024

Mumbai: India's external debt to GDP ratio declined to 18.7 per cent at the end of March 2024 from 19.0 per cent at the end of March 2023, strengthening the country's macroeconomic fundamentals.

Although in absolute terms at the end of March 2024, India's external debt stood at $663.8 billion, an increase of $39.7 billion over its level at end-March 2023.  There was also an increase in the country's GDP because of the high economic growth. This resulted in a decline in the debt-to-GDP ratio.

What RBI Data Says?

-Valuation effect due to the appreciation of the US dollar vis-a-vis the Indian rupee and other major currencies such as the yen, the euro and SDR amounted to $8.7 billion.

- Excluding the valuation effect, external debt would have increased by $48.4 billion instead of $39.7 billion at the end of March 2024 over the end of March 2023.

-At the end of March 2024, long-term debt (with an original maturity of above one year) was placed at $541.2 billion, recording an increase of $45.6 billion over its level at the end of March 2023.

-The share of short-term debt (with original maturity of up to one year) in total external debt declined to 18.5 per cent at the end of March 2024 from 20.6 per cent at the end of March 2023.

Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves declined to 19 per cent at the end of March 2024 (22.2 per cent at the end of March 2023).

-Short-term debt on a residual maturity basis constituted 42.9 per cent of total external debt at end-March 2024 (44.0 per cent at end-March 2023) and stood at 44.1 per cent of foreign exchange reserves (47.4 per cent at end-March 2023).

-US dollar-denominated debt remained the largest component of India's external debt, with a share of 53.8 per cent at end-March 2024, followed by debt denominated in the Indian rupee (31.5 per cent), yen (5.8 per cent), SDR (5.4 per cent), and euro (2.8 per cent).

-Outstanding debt of both government and non-government sectors increased at the end of March 2024 over the level a year ago.

-The share of outstanding debt of non-financial corporations in total external debt was the highest at 37.4 per cent.

-Loans remained the largest component of external debt, with a share of 33.4 per cent, followed by currency and deposits (23.3 per cent), trade credit and advances (17.9 per cent) and debt securities (17.3 per cent).

-Debt service (i.e., principal repayments and interest payments) increased to 6.7 per cent of current receipts at end-March 2024 from 5.3 per cent at end-March 2023, reflecting higher debt service.