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?

• As per the latest Finance Ministry report titled ‘India’s External Debt: A Status Report: 2019-2020’, India’s total external debt increased by 2.8% to $558.5 billion at the end of March mainly on account of a rise in commercial borrowings.

News in detail

• The ratio of foreign currency reserves to external debt stood at 85.5% as at end-March, compared to 76% in 2019 March.
• External debt as a ratio to GDP rose marginally to 20.6%, from 19.8 %.
• Loans from multilateral and bilateral sources under external assistance — the largest constituent of sovereign borrowings — grew 4.9% to $87.2 billion. 

Reference:

1. https://www.thehindu.com/business/Economy/external-debt-increases-almost-3-to-559-billion-at-march-end/article32650478.ece