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Charts & Analysis

India's External Debt Rises to 23% of GDP, But Not a Major Worry


India’s external debt has increased as a percentage of GDP to about 23%, with Indians borrowing over $440 bn from abroad.


But note that some of this debt is rupee denominated debt, such as when an FII buys Indian government bonds.

Debt from a residual maturity standpoints gives us an interesting picture.


  • Most debt is from ECBs but a good portion of our external debt is sovereign, that is, government debt owned by FIIs.
  • External commercial borrowings (ECB) form about 40% of our total borrowings.
  • NRIs have the second largest exposure, and they add up to over 100,000 cr. Troublesome there is that most of their debt matures in the short term (1 year) but they usually keep those deposits going anyhow. (and even that debt is rupee denominated)

This is not a source of worry- we have much of this debt repayable in rupees, and though it is repatriable it is likely to stay within the country, and be reinvested. As we open up the economy the fear of external debt or short-term versus long-term will have to be tempered. While it is true that in cases of extremes India can suffer when money goes out, it is only the freedom to go out that brings more money in.

While external debt has gone up, its not necessarily bad. After all if someone abroad wants to give us loans at lower prices, Indians should be free to take them. Are we overleveraged, at 23% of GDP? We don’t think so.


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