India's External Debt Reaches USD 778.2 Billion
The Reserve Bank of India (RBI) has released fresh macroeconomic data showing that India's total external debt increased by USD 15.4 billion to reach USD 778.2 billion at the end of the June quarter. This uptick from the previous March quarter has once again brought the discussions surrounding the country's external liabilities and foreign exchange reserves to the forefront of economic analysis.
External borrowing is a critical component of financing national development projects, bolstering infrastructure, and meeting corporate capital requirements. However, monitoring the trajectory of such massive debt remains essential to ensure macroeconomic stability and safeguard against external economic shocks.
Composition of Foreign Currency Denominated Debt
According to the central bank's report, US dollar-denominated debt continues to be the largest component of India's external debt, accounting for 54.8 percent of the total at the end of June. Indian rupee-denominated debt stood as the second-largest category at 29.8 percent, offering a natural cushion against foreign exchange volatility.
Other notable currencies in the basket included the Japanese yen at 6.9 percent, Special Drawing Rights (SDR) at 4.1 percent, and the euro at 3.5 percent. This diversified currency composition reflects careful debt management strategies by Indian authorities.
Debt Servicing Ratio Remains Stable
Loans formed the largest share of the debt components at 34.3 percent, followed by currency and deposits at 22.2 percent, trade credit and advances at 19.1 percent, and debt securities at 16.5 percent. Crucially, the debt service ratio—representing principal repayments and interest payments—stood at 5.6 percent of current receipts, remaining unchanged from the March quarter.
Financial experts note that as long as the debt service ratio remains well within safe thresholds, the country's capacity to service its external obligations remains robust, backed by a strong and resilient foreign exchange reserve buffer.
