The Reserve Bank of India (RBI) has recently published data on India’s external debt, revealing that it has experienced a slight increase, reaching USD 629.1 billion by the end of June 2023. This data, while showing a rise in external debt, also highlights a positive trend: a declining debt-to-GDP ratio, which now stands at 18.6%.
According to the RBI’s data, the increase in debt amounted to USD 4.7 billion compared to the figures reported at the end of March 2023 when the debt stood at USD 624.3 billion. This rise can be attributed to various factors, including economic conditions, international trade, and currency valuations.
One noteworthy factor affecting the debt figures is the valuation effect resulting from the appreciation of the US dollar relative to major currencies such as the Japanese yen and Special Drawing Rights (SDR). This effect amounted to USD 3.1 billion. If we exclude this valuation effect, the actual increase in external debt would have been more substantial, at USD 7.8 billion, by the end of June 2023, as compared to the previous quarter.
The composition of India’s debt reveals that the largest component remains debt denominated in US dollars, accounting for 54.4% of the total. Debt denominated in the Indian rupee comes next, representing 30.4% of the external debt. Other significant components include SDR (5.9%), yen (5.7%), and the euro (3.0%).
Breaking down the debt into categories, long-term debt, which has an original maturity of more than one year, reached USD 505.5 billion by June 2023. This reflects an increase of USD 9.6 billion compared to the figures reported at the end of March 2023.
Short-term debt, on the other hand, with an original maturity of up to one year, accounted for 19.6% of the total external debt by the end of June 2023, down slightly from 20.6% at the end of March 2023. Additionally, the ratio of short-term debt (original maturity) to foreign exchange reserves decreased to 20.8% by June 2023, compared to 22.2% at the end of March 2023.
The RBI’s report also provides insights into changes in outstanding debt for the general government and non-government sectors by the end of June 2023. While the general government’s outstanding debt decreased, non-government debt showed an increase.
Non-financial corporations held the highest share of debt composition at 39.8%, followed by deposit-taking corporations (excluding the central bank) at 26.6%, the general government at 21.1%, and other financial corporations at 7.6%.
Regarding the components of debt, loans constituted the largest share, accounting for 32.9% of the total external debt. Currency and deposits followed at 22.9%, trade credit and advances at 19.0%, and debt securities at 16.8%.
The release of this data provides valuable insights into India’s external debt dynamics, offering a comprehensive view of its composition and trends. While there has been a marginal increase in external debt, the declining debt-to-GDP ratio indicates a positive trend in managing the country’s external financial obligations.