According to recent data released by the Reserve Bank, India’s external debt has witnessed a slight increase, reaching USD 624.7 billion by the end of March 2023. However, a notable aspect is that the debt-to-GDP ratio has actually declined during the same period. The appreciation of the US dollar against major currencies, including the Indian rupee, yen, SDR, and euro, resulted in valuation gains amounting to USD 20.6 billion, which has partially offset a potentially larger increase in the external debt.
Comparing the figures to the previous year, India’s external debt has risen by USD 5.6 billion from March 2022 when it stood at USD 619.1 billion. However, the data from the Reserve Bank reveals a positive trend in terms of the debt-to-GDP ratio, which decreased from 20 percent in March 2022 to 18.9 percent in March 2023.
It is important to note that if the valuation effect resulting from the US dollar appreciation is excluded, the external debt would have increased by USD 26.2 billion instead of the reported USD 5.6 billion from March 2022 to March 2023.
As of March 2023, long-term debt, with an original maturity of over one year, amounted to USD 496.3 billion, showing a decline of USD 1.1 billion compared to March 2022. On the other hand, the share of short-term debt, with an original maturity of up to one year, in the total external debt increased from 19.7 percent in March 2022 to 20.6 percent in March 2023.
The ratio of short-term debt, based on original maturity, to foreign exchange reserves also increased from 20 percent in March 2022 to 22.2 percent in March 2023. The largest component of India’s external debt remained the US dollar-denominated debt, accounting for 54.6 percent, followed by debt denominated in the Indian rupee (29.8 percent), SDR (6.1 percent), yen (5.7 percent), and the euro (3.2 percent).
Within the composition of external debt, loans constituted the largest component, with a share of 32.5 percent, followed by currency and deposits (22.6 percent), and trade credit and advances (19.9 percent). Debt securities also accounted for a portion of the external debt.
In terms of debt service, which includes principal repayments and interest payments, there has been a slight increase to 5.3 percent of current receipts by the end of March 2023, compared to 5.2 percent in March 2022. This reflects higher debt service obligations that need to be managed effectively.