India’s External Debt
Source : The Hindu
GS II : Indian Economy
Overview
- News in Brief
- What is the reason for external Debt?
Why in News ?
As per the RBI India’s external debt has risen up to $624.7 billion during the financial year 2023.
News in Brief
- India’s external debt increased by $5.6 billion to $624.7 billion by the end of March 2023 from the prior year, although the external
Image by Rilson S. Avelar from Pixabay debt-to-GDP ratio decreased from 20% to 18.9%.
- The value gains resulting from the strengthening of the dollar against the Indian rupee and other important currencies including the JPY, SDR, and euro were estimated at $20.6 billion.
- Without the value impact, the foreign debt at the end of March 2023 over the end of March 2022 would have climbed by $26.2 billion as opposed to $5.6 billion.
- The current value of the payments specified in the initial agreement between the debtor and creditor, based on the supposition that they would be made with certainty, is the contractual value of a debt.
- With an initial duration of more than a year, long-term debt was valued at $496.3 billion, a $1.1 billion decrease from the level at the end of March 2022.
- At the end of March 2023, short-term debt (with an initial duration of up to one year) represented 20.6% of total external debt, up from 19.7% in the previous year.
- With a proportion of 54.6% at the end of March 2023, debt denominated in dollars continued to make up the greatest portion of external debt. This was followed by debt denominated in Indian rupees (29.8%), SDR (6.1%), yen (5.7%), and euros (3.2%).
- During FY23, the total amount of outstanding debt in the public and private sectors increased to $133.3 billion ($130.8 billion in FY22) and $491.3 billion ($488.3 billion), respectively.
What is the reason for external Debt?
- Money borrowed from an outside source is what it refers to. Foreign debt must be repaid in the currency used for the initial loan.
Sources - Foreign commercial banks, international financial organisations like the World Bank, Asian Development Bank (ADB), and the governments of other countries are all sources of external debt.
- These forms of debts typically take the form of linked loans, which must be utilised for certain purposes agreed upon by the borrower and the lender.
- Both firms and governments are eligible to borrow money abroad. These take the shape of commercial borrowings from outside sources.
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