International Journal of Foreign Trade and International Business
2021, Vol. 3, Issue 1, Part A
Trends and composition of India’s external debt
External debt is the major source of international capital flow, that help in overall growth and development of any nation. The importance gets increased in the case of developing country where there is always a saving investment gap. In developing country savings are always less to finance investment opportunity where international capital flow from external debt play a vital role. In the present paper we have discussed the basic concept of external debt together with its sources. We have taken the data from official website of RBI for the period of eighteen years started from 2001-02 to 2019-20. The paper focused on studying the trends and composition of India’s external debt. To study the composition, we have taken the average of % of share of various sources in total external debt over a period of eighteen years. We found that during the last eighteen year, the maximum debt came from commercial borrowings, followed by NRI deposits and short-term deposits. To study the trends, we have calculated the growth indices taking 2001-02 as a base. With the help of growth indices, we concluded that all sources of debt be it a long term or short term have shown increasing trends, except the rupee debt. Thereafter we have applied the semi log regression model to calculate annual compounding growth rate. We found that for all the sources the growth rate is positive and also statistically significant at 1 percent level of significant except rupee debt where the growth rate is negative and debt to GDP ratio where growth rate was not found to be statistically significant. From data analysis, we concluded that India’s external debt is rising but India is able to manage it efficiently.