India External Debt: Centre allays concerns over $620.7 billion external debt, says its share only 21%

The Centre dismissed apprehensions about India‘s external debt, saying out of India’s total external liability of $620.7 billion, the Centre’s share is just $130.8 billion, 21% of the total debt liability.

This also includes India’s Special Drawing Right (SDR) allocation.

“The rumour doing the rounds that the central government is burdened with debt is baseless,” a source told ET, adding that more than 40% of the debt is by non-financial corporations.

Officials clarified the debt position following concerns over India’s external debt as $267 billion repayments are due in less than one year.

This caused apprehension that repayments would further erode India’s foreign exchange reserves and cause more currency depreciation.

“This analysis is incomplete, incorrect, and it misses some basic facts,” a source said.

Officials told ET that while it is true that payment of $267.7 billion of debt is due in less than a year, the Centre’s share in this is just $7.7 billion or less than 3%, thus the debt level of the government is very much manageable and stands out safe.

RBI data reveals that central government debt declined from 52.2% of GDP at end of FY 2013-14 to about 51.8% of GDP at end of FY 2019-20. However, this went up again in FY21 by about 10% of GDP in a single year mainly on account of Covid-19.

India’s gross public debt at 86.9% of the GDP is high but better compared to many other countries, officials said. The US has a gross public debt of 125.6%, France has 112.6%, Canada 101.8%, Brazil 91.9% and the UK 87.8% of their respective GDPs.

External debt as a percentage of total debt has declined from about 6.4% in 2013-14 to 4.7% in 2021-22.

State Debt

Data however raises concerns over the debt of some states, which has been already flagged time and again by the RBI and the economists. There is also evidence of several states resorting to off-budget borrowing.

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