India’s external debt grows by $29 billion, crosses $711 billion mark

June 8, 2025 by News Desk

India’s external debt continues to rise in absolute terms, reflecting growing corporate borrowings and valuation shifts, but the overall debt situation remains stable relative to the size of the economy.

According to recent figures, India’s total external debt stood at US $711.8 billion at the end of September 2024, marking an increase of over US \$29 billion from the previous quarter.

The debt-to-GDP ratio, however, edged up only slightly to 19.4 percent, indicating that strong economic expansion is helping absorb the increase.

Despite the rise in borrowing, India’s debt remains well-covered by its robust foreign exchange reserves, which stand at approximately US $691.5 billion.

The reserve coverage of external debt is close to 96 percent, a comfortable buffer that allows the Reserve Bank of India (RBI) to manage currency fluctuations and potential external shocks.

In contrast to many emerging economies, India’s foreign reserve position supports more than 11 months of imports and nearly matches its total foreign liabilities.

Much of the recent increase in external debt has come from a surge in External Commercial Borrowings (ECBs) by Indian corporations. In March 2025 alone, Indian firms raised a record US $11 billion through ECBs — the highest monthly inflow in five years.

The trend continued through the fiscal year, with total ECB inflows reaching US $61 billion, led by non-banking financial companies (NBFCs) that turned to overseas funding amid tighter domestic credit conditions.

Meanwhile, short-term debt — a category closely watched for rollover risk — has declined as a share of total external debt. From 20.6 percent in mid-2023, it dropped to 18.5 percent by September 2024.

This decline reflects a healthier debt structure, where long-term instruments dominate, reducing the immediate repayment pressure on the economy.

India’s external liabilities are also diversified in currency terms. About 54 percent of the debt is denominated in US dollars, followed by 31 percent in Indian rupees, while smaller shares are held in Japanese yen, Special Drawing Rights (SDRs), and euros. This currency mix provides partial insulation from fluctuations in any single exchange rate.

The foreign debt India takes is used primarily to finance development projects, support corporate expansion, and maintain macroeconomic stability. Large infrastructure initiatives such as roads, power plants, and urban development require substantial funding beyond what domestic savings can provide. Indian companies also borrow from abroad to invest in business growth, new technologies, and acquisitions.

Additionally, external borrowing helps maintain adequate foreign exchange reserves to safeguard the economy against external shocks and ensure stable imports.

In summary, while India’s external debt has increased, the nation’s growing economy, strong reserves, and improved debt profile suggest a broadly sustainable path.

Economists view the current trajectory as manageable, so long as GDP growth remains solid.