About 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.
- If a country cannot repay its external debt, it faces a debt crisis.If a nation fails to repay its external debt, it is said to be in sovereign default.
- India’s external debt includes Commercial Borrowings, Sovereign Borrowings, Non-Resident Deposits and Trade credits.
- Foreign Direct Investments are not included in the external debt account.
Why in News?
- According to RBI’s latest data, India’s external debt rose to $620.7 billion at end-March 2022, recording an increase of $47.1 billion over the year earlier period.
- The external debt to GDP ratio declined to 19.9% at end-March 2022 from 21.2% a year earlier.
- U.S. dollar-denominated debt remained the largest component of India’s external debt, with a share of 53.2%.