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India’s External Debt

6th September, 2022 Economy

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  • The External Debt Management Unit (EDMU) in the Department of economic Affairs, Ministry of Finance, has released 28th edition of the Status Report on India’s External Debt 2021-22.


External Debt

  • External debt is the part of a country's total debt that was borrowed from foreign lenders, including commercial banks, governments or international financial institutions. Debtors can be individuals, corporations or the government.

India’s External Debt: Present Trends

External Debt

  • India’s external debt, at US$ 620.7 billion as at end-March 2022, grew by 8.2 per cent over US$ 573.7 billon as at end-March 2021. While 53.2 per cent of it was denominated in US dollar, Indian rupee denominated debt, estimated at 31.2 per cent, was the second largest.

External debt to GDP Ratio

  • External debt as a ratio to GDP fell marginally to 19.9 per cent as at end-March 2022 from 21.2 per cent a year ago. Foreign currency reserves as a ratio to external debt stood slightly lower at 97.8 per cent as at end-March 2022 than 100.6 per cent a year ago.

Long Term Debt

  • The long-term debt estimated at US$ 499.1 billion, constituted the largest chunk of 80.4 per cent, while the short-term debt, at US$ 121.7 billion, accounted for 19.6 per cent of the total. The short-term trade credit was predominantly in the form of trade credit (96 per cent) financing imports.


Commercial borrowings (CBs), NRIs deposits, short-term trade credit and multilateral loans

  • Commercial borrowings (CBs), NRIs deposits, short-term trade credit and multilateral loans together accounted for 90 per cent of the total external debt.
  • While NRI deposits marginally contracted during end-March 2021 and end-March 2022, CBs, short-term trade credit and multilateral loans, on the other hand, expanded during the same period.
  • The rise in CBs, short-term trade credit and multilateral loans together was significantly larger than the contraction in NRI deposits.

Sovereign External Debt (SED)


  • As at end-March 2022, sovereign external debt (SED) amounted to US$ 130.7 billion, increasing by 17.1 per cent over the level a year ago, reflecting the additional allocation of SDRs by the IMF during 2021-22. SDRs rose to US$ 22.9 billion from US$ 5.5 billion as at end-March 2021. FPI holding of G-Sec, on the other hand, slid to US$ 19.5 billion from US$ 20.4 billion a year ago.


Sovereign debt is a central government's debt. It is issued by the national government and can be denominated in both foreign or domestic currency.


Non-sovereign external debt

  • Non-sovereign external debt, estimated at US$ 490.0 billion as at end-March 2022, posted a growth of 6.1 per cent over the level a year ago.
  • CBs, NRI deposits, and short-term trade credit accounted for about 95 per cent of non-sovereign debt., The short-term trade credit rose substantially by 20.7 per cent to US$ 117.4 billion as at end-March 2022 on the back of a surge in imports during 2021-22.


Non-sovereign bonds are bonds issued by the local governments such as states, provinces, and cities, and not by the national government. The characteristics of non-sovereign bonds are as follows: Credit rating is usually high as rate of default is low.

Debt Service Ratio

  • The debt service ratio fell to 5.2 per cent during 2021-22 from 8.2 per cent during 2020-21 due to buoyancy in current receipts and a decline in debt service payments. The debt service payment obligations arising out of the stock of external debt as at end-March 2022 are projected to trend downwards over the coming years.


The debt service ratio is one way of calculating the ability to repay debt.


Cross-Country comparison

  • In a cross-country perspective, India’s external debt is modest, occupying 23th position globally. In terms of various debt vulnerability indicators.
  • India’s sustainability was better than the Low-and-Middle Income Countries (LMICs) as a group and vis-à-vis many of them individually.