India’s external debt rose by $4.7 billion in a quarter to stand at $629.1 billion as at end-June 2023, according to RBI.

In the last four quarters, this metric has increased by $16.3 billion. However, the external debt to GDP ratio declined to 18.6 per cent at the end of June 2023, from 18.8 per cent at end-March 2023 and 19.4 per cent at end-June 2022.

“Valuation effect due to the appreciation of the US dollar vis-à-vis the major currencies such as yen and SDR (special drawing rights) amounted to $ 3.1 billion. Excluding the valuation effect, external debt would have increased by $ 7.8 billion instead of $4.7 billion at end-June 2023 over end-March 2023,” RBI said.

Loans remained the largest component of external debt, with a share of 32.9 per cent, followed by currency and deposits (22.9 per cent), trade credit and advances (19.0 per cent) and debt securities (16.8 per cent).

Debt service (that is principal repayments and interest payments) increased to 6.8 per cent of current receipts at the end of June 2023 as compared with 5.3 per cent at the end of March 2023, reflecting higher debt service, RBI said in its statement on external debt.

Long and short term debt

At June 2023-end, long-term debt (with original maturity of above one year) was placed at $505.5 billion, recording an increase of $9.6 billion over its level at end-March 2023. As at end-June 2022, long-term debt stood at $486.8 billion.

The share of short-term debt (with original maturity of up to one year) in total external debt declined to 19.6 per cent at end-June 2023 from 20.6 per cent at end-March 2023 and 21.0 per cent at end-June 2022.

Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves declined to 20.8 per cent at end-June 2023 (22.2 per cent at end-March 2023 and 22.0 per cent at end-June 2022).

RBI said US dollar-denominated debt remained the largest component of India’s external debt, with a share of 54.4 per cent at end-June 2023, followed by debt denominated in the Indian rupee (30.4 per cent), SDR (5.9 per cent), yen (5.7 per cent), and the euro (3.0 per cent).