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.