India's External Debt climbs to $717.9 billion in December 2024 | Current Affairs | Vision IAS
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India's External Debt climbs to $717.9 billion in December 2024

Posted 02 Apr 2025

2 min read

As per Finance Ministry’s Quarterly External Debt Report (December 2024), External Debt has risen by 10.7% (from December 2023) mainly due to Valuation Effect.

  • Valuation effect occurs due to the appreciation of US dollar vis-à-vis the Indian Rupee. 

Other Key Highlights of the Report

  • External Debt to GDP ratio: Stood at 19.1% (December, 2024) from 19.0% (September, 2024). 
  • Composition: US dollar Denominated Debt and Loans constituted the largest component. 
  • Debt service (Principal repayments plus interest payments): Declined by 0.1% (September - December, 2024).  
  • Long Term Vs Short Term Debt: Former recorded a marginal increase while the latter observed a marginal decline

About External Debt

  • Meaning: Refers to the money borrowed from sources outside the country, by both the Central Government and Corporations (External Commercial Borrowings).
    •  Predominantly denominated in other currencies viz., US Dollar, SDR, etc., 
  • Sources: Could be foreign commercial banks, international financial institutions like IMF, World Bank, etc., or foreign governments. 

Challenges with rising External Debt 

  • Repayment Burden: Since, it is usually denominated in other currencies, changes in exchange rate affects its repayment burden.
  • Rising Inflation: Prolonged inflation further increases the interest rates, slowing down growth, resulting in a higher external debt to GDP ratio
  • Global Scenario: Global threat of stagflation may lower the demand for India’s exports affecting the debt service ratio.
  • Tags :
  • External Debt
  • Debt - GDP Ratio
  • Valuation Effect
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