India's External Debt Surges: What You Need to Know

Significant Rise in External Debt

Mumbai: According to the Reserve Bank of India, the nation's external debt rose by 10% to reach USD 736.3 billion by the end of March 2025, up from USD 668.8 billion the previous year.

The external debt as a proportion of GDP also saw an increase, climbing to 19.1% at the close of the last financial year, compared to 18.5% a year earlier.

The RBI noted that fluctuations in currency markets contributed to a 'valuation effect' of USD 5.3 billion due to the US dollar's appreciation against the rupee and other currencies. Excluding this effect, the external debt would have risen by USD 72.9 billion instead of USD 67.5 billion over the year.

This total external debt encompasses USD 261.7 billion in loans from non-financial corporations, USD 168.4 billion from the government, and USD 202.1 billion from deposit-taking institutions, excluding the central bank.

As of March 2025, long-term debt (with a maturity exceeding one year) stood at USD 601.9 billion, reflecting an increase of USD 60.6 billion from the previous year.

The proportion of short-term debt (with a maturity of one year or less) in the overall external debt decreased to 18.3% at the end of March 2025, down from 19.1% a year prior. However, the ratio of short-term debt to foreign exchange reserves rose to 20.1% in FY25, compared to 19.7% at the end of March 2024.

The largest segment of India's external debt remains US dollar-denominated, accounting for 54.2% as of March 2025, followed by rupee-denominated debt (31.1%), yen (6.2%), SDR2 (4.6%), and euro (3.2%).

Loans constitute the largest share of external debt at 34%, followed by currency and deposits at 22.8%, trade credit and advances at 17.8%, and debt securities at 17.7%.