India’s external debt surged around 11 per cent at the end of December in Fiscal year 2024-25 as compared to the corresponding month of the last fiscal, according to data from Finance Ministry. Also, during the nine-month period of the current fiscal, total increase was around $49 billion.

The External Debt Report has not mentioned the reasons for the surge. However, as non-financial corporation has the largest share in the total amount, it is believed that considering lower interests abroad, more money is being brought to fulfill corporates’ requirements and fund infrastructure. Significantly, the outstanding external debt of general government has declined.

Data shows that at end-December 2024, India’s external debt was placed at around $718 billion as against around $648 billion of end-December 2023, recording an increase of over $69 billion or 10.7 per cent.

On a sequential basis, end-December debt rose by $5.2 billion or 0.7 per cent increase as compared to around $713 billion at end-September 2024. The debt-to-GDP ratio rose to 19.1 per cent at end December as against 19 per cent of September of 2024 and 18.4 per cent of December 2023.

The Economic Affairs Department noted, “Valuation effect due to the appreciation of the US dollar vis-à-vis the Indian rupee and other major currencies, such as yen, the euro and SDR2 amounted to $12.7 billion during the quarter ended December 2024. Excluding the valuation effect, the increase in external debt would have been $17.9 billion instead of $5.2 billion at end December 2024 over end-September 2024.”

At end-December 2024, long-term debt (with an original maturity of above one year) was placed at over $578 billion, recording a marginal increase of $0.2 billion over its level at end-September 2024. The share of short-term debt (with original maturity of up to one year) in total external debt increased to 19.4 per cent at end-December 2024 from 18.9 per cent at end-September 2024. Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves increased to 22 per cent at end-December 2024 from 19.1 per cent at end-September 2024.

US dollar denominated debt remained the largest component of India’s external debt, with a share of 54.8 per cent at end-December 2024, followed by Indian Rupee (30.6 per cent), Japanese Yen (6.1 per cent), SDR (4.7 per cent) and Euro (3 per cent).

The outstanding external debt of general government declined while that of non-Government sector increased at end-December 2024 over its level at end-September 2024. It may be noted that general government debt includes external assistance under government account, defence debt, investment in Treasury Bills/government securities by foreign portfolio investors, foreign central banks and international institutions, and SDR allocations by the IMF.

The share of outstanding debt of non-financial corporations in total external debt was 36.5 per cent, followed by deposit-taking corporations (except the central bank) (27.8 per cent), general government (22.1 per cent) and other financial corporations (8.7 per cent).

Loans were the largest component of external debt, with a share of 33.6 per cent, followed by currency and deposits (23.1 per cent), trade credit and advances (18.8 per cent) and debt securities (16.8 per cent).

Published on March 30, 2025