Finance Minister Nirmala Sitharaman stated that India’s external debt stood at USD 624.7 billion as of March-end 2023, with a debt-service ratio of 5.3 percent, which she considers to be within a comfortable range and modest in a global context. She noted that the ratio of external debt to GDP decreased from 20 percent to 18.9 percent over the year.
Sitharaman emphasized that the majority of the external debt is in the form of long-term loans (79.4 percent), with short-term debt accounting for 20.6 percent, primarily used for imports. This, she believes, enhances the overall stability of the external debt.
Compared to other Low and Middle-Income Countries (LMICs), India’s external debt metrics, including the share of short-term debt, external debt to GNI, forex reserves to external debt, and external debt to exports, are favorable.
The report highlighted a slight increase in the debt service ratio from 5.2 percent in the previous year to 5.3 percent in 2022-23. This is attributed to higher debt service payments, which rose from USD 41.6 billion to USD 49.2 billion.
The debt service ratio measures the proportion of gross debt service payments (including principal and interest) to external current receipts, indicating the extent of forex reserves allocated for debt repayment.
The increase in debt service payments was influenced by higher payments in commercial borrowings (including multilateral and bilateral sources), external assistance, and NRI deposits.
India’s external debt increased by 0.9 percent (USD 5.6 billion) compared to the previous year, totaling USD 624.7 billion at the end of March 2023. Foreign exchange reserves covered 92.6 percent of the external debt at that time.
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