India's external debt rises to $762.8 billion in FY26, debt-to-GDP ratio climbs

India's total external debt reached $762.8 billion by end-March 2026 (FY26), rising by $26.3 billion year-on-year. The debt-to-GDP ratio climbed to 20.8%, up...

What Happened

India's total external debt reached $762.8 billion by end-March 2026 (FY26), rising by $26.3 billion year-on-year.
The debt-to-GDP ratio climbed to 20.8%, up from approximately 19.1% in the previous year.
The appreciation of the US dollar against other major currencies during FY26 contributed significantly to the valuation effect on the headline figure, as the majority of India's external debt is denominated in US dollars.
Long-term debt (original maturity of over one year) saw a modest increase, while the share of short-term debt in total external debt grew, raising concerns about near-term repayment obligations.
Commercial borrowings, NRI deposits, and short-term trade credits remained the principal drivers of external debt accumulation.

Static Topic Bridges

What Is External Debt?

External debt refers to the total amount of money that a country's residents — government, public sector enterprises, banks, and private corporates — owe to foreign creditors. It is recorded as a liability in a country's International Investment Position (IIP).

External debt in India is classified by: (a) maturity — long-term (original maturity > 1 year) vs. short-term (original maturity ≤ 1 year); (b) debtor category — sovereign vs. non-sovereign; (c) creditor type — multilateral, bilateral, commercial, NRI, etc.
Sovereign external debt (government and government-guaranteed debt) accounts for approximately 23% of India's total external debt; the remaining ~77% is non-sovereign (commercial borrowings, NRI deposits, short-term trade credits).
Key components: External Commercial Borrowings (ECBs), NRI deposits (FCNR-B and NRE accounts), short-term trade credits, multilateral loans (World Bank, ADB, IMF), bilateral loans, and FII/FPI investments in government securities.
The External Debt Management Unit (EDMU) in the Department of Economic Affairs (Ministry of Finance) and the Reserve Bank of India jointly compile and publish external debt statistics.

Connection to this news: India's $762.8 billion external debt reflects the combined stock of all these liabilities as of March 2026, with the rise driven primarily by commercial borrowings and NRI deposits in the non-sovereign segment.

Short-Term Debt and Sustainability Concerns

Short-term debt is particularly significant for assessing external sector vulnerability, since it must be rolled over or repaid within a year, requiring adequate foreign exchange reserves.

Short-term debt by original maturity includes all debt with original tenor of one year or less (primarily trade credits).
Short-term debt by residual maturity includes all short-term original maturity debt plus long-term debt falling due within the next twelve months — this is the key indicator for reserve adequacy assessment.
At end-September 2025, short-term debt on residual maturity basis was 41.6% of total external debt and 44.4% of foreign exchange reserves.
A rising share of short-term debt in total external debt signals increased rollover risk and vulnerability to sudden capital flow reversals.
Standard sustainability indicators include: external debt as % of GDP (India at 20.8% — considered moderate by international standards), debt service ratio (interest + principal repayment as % of current account receipts), and short-term debt as % of forex reserves.

Connection to this news: The growing share of short-term debt in India's external debt mix in FY26 is the primary concern flagged — it increases the country's dependence on a stable global financing environment for rollover.

Valuation Effect and Currency Composition

Changes in the exchange rate of major currencies can mechanically alter the US dollar value of external debt stocks even without any actual borrowing or repayment, through the "valuation effect."

US dollar-denominated debt is the largest component of India's external debt (~54% at end-September 2025), followed by Indian Rupee-denominated debt (~30.4%), Japanese Yen (~6.5%), SDR (~4.5%), and Euro (~3.6%).
When the US dollar appreciates against other currencies (like the Rupee or Yen), the dollar value of non-dollar debt rises when converted to US dollars for reporting; conversely, dollar-denominated debt's value in Rupees rises, increasing the cost of servicing.
A stronger US dollar simultaneously inflates the reported headline debt figure and increases the Rupee cost of debt servicing.

Connection to this news: The US dollar's significant appreciation during FY26 was a key factor behind the $26.3 billion YoY increase in India's external debt — part of the rise reflects valuation effects rather than new net borrowings.

Key Facts & Data

India's total external debt at end-March 2026 (FY26): $762.8 billion
Year-on-year increase: $26.3 billion
Debt-to-GDP ratio: 20.8% (up from ~19.1% the previous year)
Long-term debt share: approximately 81.7% of total (short-term: ~18.3%)
Short-term debt by residual maturity as % of forex reserves: 44.4% (as of September 2025)
Currency composition: USD ~54%, INR ~30.4%, JPY ~6.5%, SDR ~4.5%, EUR ~3.6%
Sovereign external debt: ~23% of total; non-sovereign: ~77%
Non-sovereign components: ECBs, NRI deposits (FCNR-B, NRE), short-term trade credits, FPI in G-Secs
India's external debt is published in the Annual Status Report on India's External Debt by the Department of Economic Affairs
An external debt-to-GDP ratio below 30–35% is generally considered low to moderate risk by international norms