What is external debt?

• External debt is the portion of a country’s debt that is borrowed from foreign lenders through commercial banks, governments, or international financial institutions.
• Governments and eligible corporations can raise loans from abroad.

Components of external debt

• India’s external debt includes

• • Commercial Borrowings,

• • Sovereign Borrowings,

• • Non-Resident Deposits,

• • Trade credits

Why in News?

• According to RBI data, India’s external debt stood at $558.5 billion in March, an increase of $15.4 billion compared with the year-ago period.
• Commercial borrowings remained the largest component of the external debt, with a share of 39.4%, followed by non-resident deposits at 23.4% and short-term trade credit at 18.2%.
• U.S. dollar-denominated debt continued to be the largest component of India’s external debt, with a share of 53.7% at end-March 2020, followed by the Indian rupee (31.9%), yen (5.6%), SDR (4.5%) and the euro (3.5%).
• The RBI also said debt service (principal repayments plus interest payments) increased marginally to 6.5% of current receipts at the end of March compared to 6.4% in the same period a year ago. This reflects higher interest payments on commercial borrowings and lower current receipts.

https://www.thehindu.com/business/Economy/external-debt-touches-5585-bn-in-march/article31958205.ece