External Debt

The total amount India — government, companies and banks combined — owes to foreign lenders, measured against the size of the economy.

Explain it like I'm 10

External debt is simply every rupee (or, more precisely, every dollar, yen and euro) that Indian borrowers — the government, companies, and banks — owe to lenders outside the country, added up into one number. Unlike the government's domestic debt, which is owed to Indian lenders and can, in principle, be managed entirely within the domestic financial system, external debt has to be repaid in foreign currency, which makes it uniquely sensitive to how the rupee is performing at the time repayment comes due.

The formula

External Debt-to-GDP (%) =
    Total External Debt (govt + corporate + bank)
    ────────────────────────────────────────────── × 100
                    Nominal GDP

End-March 2026:
  External Debt = $762.8 billion
  Debt-to-GDP   = 20.8% of GDP  (up from 19.8% a year earlier)
  Of the rise, ≈$24.6 billion was a pure dollar-strength
  valuation effect, not new borrowing

Historical data

External Debt-to-GDP ratio, end-March, FY22–FY26 (%)

The ratio declined steadily from FY22 through FY24 as nominal GDP grew faster than new external borrowing, before ticking back up in FY25-FY26 — partly genuine fresh borrowing, and partly currency valuation effects inflating the dollar value of debt owed in other currencies.

Who calculates it

The RBI and the Ministry of Finance jointly publish India's external debt statistics quarterly, with the RBI providing detailed status reports twice a year.

Where this number can mislead you

⚠A rising external debt-to-GDP ratio can be driven substantially by currency valuation effects — a stronger dollar mechanically increases the dollar value of debt owed in other currencies — rather than by any actual new borrowing.
⚠The headline ratio blends government, corporate and bank debt together; the risk profile of sovereign external debt (default risk borne by the state) is very different from that of a private company's external borrowing, which the government has no obligation to bail out.
⚠India's external debt is relatively short-duration in parts (short-term trade credit and similar instruments), which creates refinancing risk if global credit conditions tighten suddenly, distinct from the risk profile of longer-term borrowing.
⚠The ratio doesn't by itself indicate India's ability to service the debt — for that, analysts look at the debt-service ratio (debt payments relative to export earnings) and reserve cover, both of which can tell a different story than the headline debt-to-GDP number.

Reality check

India's external debt rose to $762.8 billion by end-March 2026, pushing the debt-to-GDP ratio to 20.8% from 19.8% a year earlier — but roughly $24.6 billion of that year-on-year increase was purely a currency valuation effect, from a stronger dollar inflating the dollar-value of debt actually owed in other currencies, not fresh external borrowing.

Test yourself

Question 1 of 5Score: 0

What makes External Debt uniquely different from a government's domestic debt?