- Concept: Debt-to-GDP ratio is the total debt of a country as a percentage of its Gross Domestic Product.
- Significance for Fiscal Health:
- It is a key indicator of a country’s fiscal health.
- A lower ratio indicates a healthier fiscal position.
- It shows a country’s ability to repay its debt.
- For India, higher GDP growth leads to a lower debt-to-GDP ratio.
- This is because the interest rate on debt has been less than India’s growth rate.
External Debt of India = External Debt of India refers to the debt owed to non-residents by the residents of the country (i.e., government and the private sector). As on 30th Sept. 2022, external debt of India was $610.5 Billion (19.2% of GDP).
| EXTERNAL DEBT OF INDIA (as on 30th Sept. 2022) $610.5 billion = 19.2% of GDP | |
|---|---|
| ”Sovereign Debt" | "Non-Sovereign Debt” |
| $124.5 billion (3.9% of GDP) | $486 billion (15.3% of GDP) |
| Sovereign Debt is also called Govt. of India (external) Debt (State Govt. external debt is in the name of GoI only) | It includes |
| It includes • FPI/FII investments in G-securities • Loans under Bilateral Assistance • Loans under Multilateral Assistance | • Commercial Borrowing • External Commercial Borrowing ECB plus FII investments in Indian corporate bonds • NRI Deposits |
- India’s external debt can also be classified as ‘short-term’ (21.6%) and long-term debt.
- Commercial borrowings remained the largest component of external debt followed by non-resident deposits.
- Currency wise, India’s external debt includes:
- US Dollar denominated (55.5%)
- Indian Rupee denominated (30%)
- And then some is SDR, Yen, Euro.