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India’s External Debt: Key Highlights and Analysis for FY24

  • Writer: chethan dk
    chethan dk
  • Jun 25, 2024
  • 2 min read

India has made notable progress in managing its external debt, achieving significant improvements over the past year. Here's a detailed look at the key highlights from the latest Reserve Bank of India (RBI) report:

1. 13-Year Low in External Debt Ratio

  • India's external debt ratio fell to 18.7% of GDP in FY24, the lowest in 13 years, down from 19% in the previous year.

2. Total External Debt

  • The country’s total external debt reached $663.8 billion as of March 2024, adding nearly $40 billion over the year.

3. Valuation Effect

  • The appreciation of the US dollar and other major currencies against the Indian rupee contributed to a valuation effect of $8.7 billion. Without this effect, the external debt increase would have been $48.4 billion.

4. Debt Composition

  • Dollar-Denominated Debt: Largest component at 53.8%.

  • Rupee-Denominated Debt: Approximately one-third of the total debt.

  • Yen-Denominated Debt: 5.8% share.

  • Loans: Largest component among debt types at 33.4%.

  • Currency and Deposits: Second largest at 23.3%.

5. Sectoral Debt Distribution

  • Non-Financial Corporations: Highest share of external debt at 37.4%.

  • General Government: 22.4% share.

6. Debt Changes Across Sectors

  • General Government Debt: Increased by 11.5%.

  • Households and Nonprofit Institutions: Declined by 16.5%.

  • Other Financial Corporations: Reduced by 11.8%.

7. Short-Term Debt

  • Total Short-Term Debt: Declined to 18.5% of total external debt from 20.6%.

  • Ratio to Foreign Exchange Reserves: Dropped to 19% from 23.1%.

8. Debt Servicing

  • Improved to 6.7% in FY24 from 5.3% the previous year.

9. Foreign Exchange to Debt Ratio

  • Improved to 97.4% from 92.7%, indicating stronger reserve coverage.

10. Credit Rating Outlook

  • S&P Global Ratings revised India’s outlook to stable, hinting at a potential rating upgrade if general government debt continues to improve. India is currently rated 'BBB-' by S&P.

India's strides in managing its external debt are a testament to prudent fiscal policies and economic resilience. These improvements not only bolster the country’s financial stability but also enhance its attractiveness to global investors. With better debt servicing and a stable outlook from credit rating agencies, India is on a promising path toward economic strength and sustainability.

Stay tuned to our blog for more updates on India's economic journey and other insightful financial analyses. If you found this article helpful, don't forget to share it with your friends and colleagues! Let's keep the conversation going in the comments below. What are your thoughts on India’s financial progress?

 

 
 
 

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