India’s external debt rose to USD 747.2 billion by June 2025, with the debt-to-GDP ratio easing to 18.9%. RBI data reveals increased long-term debt, declining short-term share, robust corporate borrowing, and steady repayment capacity amid valuation losses.
India’s external debt witnessed a notable rise in the second quarter of 2025, reaching USD 747.2 billion at the end of June, according to fresh RBI data. This marked an increase of USD 11.2 billion over March 2025, highlighting ongoing international borrowing trends among Indian corporates and banks. Despite this uptick, the debt-to-GDP ratio eased slightly to 18.9%, down from 19.1% in the previous quarter, reflecting the country’s resilient economic growth.
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Debt Composition and Maturity Structure
Long-term debt remains the cornerstone of India’s external liabilities. Debt with an original maturity exceeding one year rose to USD 611.7 billion, up USD 10.3 billion over the previous quarter. In contrast, short-term debt (maturing within one year) declined modestly to 18.1% of total external debt from 18.3% in March.
The ratio of short-term debt to foreign exchange reserves also fell to 19.4%, compared to 20.1% three months prior, indicating a manageable short-term liability position. When considering residual maturity—including long-term debt maturing in the next 12 months—short-term debt accounted for 40.7% of total external debt and 43.6% of foreign exchange reserves.
In terms of currency composition, the US dollar dominates India’s external debt at 53.8%, followed by the Indian rupee at 30.6%, yen at 6.6%, SDR at 4.6%, and the euro at 3.5%.
Sectoral Debt Distribution
Non-financial corporates remain the largest borrowers, with outstanding external debt rising to 35.9% of total debt. Deposit-taking corporations (excluding the central bank) follow at 27.4%, while the general government accounts for 22.5%, and other financial corporations make up 9.5%.
By instruments, loans lead at 34.8%, followed by currency and deposits at 23%, trade credit and advances at 17.7%, and debt securities at 16.8%. This sectoral spread underscores the active participation of private and banking sectors in external financing.
Valuation Impact and Debt Service
The quarter included a valuation loss of USD 5.1 billion, primarily due to the depreciation of the US dollar against the Indian rupee and other key currencies, including the yen, euro, and IMF’s SDR. Excluding currency effects, the real increase in external debt would have been USD 6.2 billion.
India’s debt service ratio—reflecting principal and interest payments as a share of current receipts—remained steady at 6.6%, suggesting that repayment capacity is stable even amid rising debt.
Policy Outlook and Implications
The strong long-term composition and declining short-term ratios point to a stable external debt profile. Rising borrowing among non-government sectors, particularly corporates and banks, signals robust international financing for domestic investment and growth.
However, continued currency volatility and a stronger US dollar could result in future valuation losses, underscoring the importance of prudent debt management in upcoming quarters.