India’s external debt surges 6% to $663.8 bn in FY24

India's external debt rose by approximately 6% year-on-year (YoY), or $39.7 billion, to reach $663.8 billion in the financial year ended March 31, 2024, according to the Reserve Bank of India (RBI) data. The external debt stood at $624.1 billion at the end of March 2023, as per the data. Despite this increase, the external debt-to-GDP ratio fell to 18.7% by the end of March 2024, down from 19% at the end of March 2023.

The external debt includes loans, currency and deposits, trade credit and advances, and debt securities. According to the RBI, the valuation effect due to the US dollar's appreciation against the Indian rupee and other major currencies like the Yen, the Euro, and SDRs (Special Drawing Rights) amounted to $8.7 billion. Without this valuation effect, external debt would have risen by $48.4 billion instead of $39.7 billion from the end of March 2023 to the end of March 2024.

The proportion of short-term debt with an original maturity of up to one year in India's total external debt decreased to 18.5% by the end of March 2024, down from 20.6% at the end of March 2023.

“Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves declined to 19.0% at end-March 2024 (22.2% at end-March 2023),” RBI states.

US dollar-denominated debt remained the largest portion of India's external debt at 53.8%, down slightly from 54.6% a year earlier. This was followed by debt in Indian rupees (31.5%), yen (5.8%), SDRs (5.4%), and euros (2.8%), it adds.

Loans made up the largest component of external debt at 33.4%, followed by currency and deposits (23.3%), trade credit and advances (17.9%), and debt securities (17.3% up).

Long-term debt, defined as debt with an original maturity of more than one year, increased by about 8% ($45.6 billion) to $541.2 billion by the end of March 2024.

On a residual maturity basis, short-term debt accounted for 42.9% of total external debt at the end of March 2024, down from 44.0% the previous year. “Short-term debt on residual maturity basis (i.e., debt obligations that include long-term debt by original maturity falling due over the next twelve months and short-term debt by original maturity) constituted 42.9% of total external debt at end-March 2024 (44.0% at end-March 2023) and stood at 44.1% of foreign exchange reserves (47.4% at end-March 2023),” RBI added.

Debt service, encompassing principal and interest payments, rose to 6.7% of current receipts by the end of March 2024, up from 5.3% the previous year.