India's Foreign Debt Crosses $736 Billion, Up 10% This Year - India Gup - Trusted Indian News on Tech, Films, Finance and More

India’s foreign debt has crossed $736 billion. In just one year, it rose by 10%. By March 2025, the Reserve Bank of India said India’s total external loan had reached this level.

This rise happened during a time when global currency markets were very volatile. RBI also said the stronger US dollar pushed the debt number even higher. Without this currency effect, the total loan would have appeared even larger.

Debt has gone up

According to the RBI, by the end of March 2025, India’s foreign debt stood at $736.3 billion. A year earlier, it was $668.8 billion. That means a jump of $67.5 billion in just one year.

Compared to GDP, the debt portion also grew. It was 18.5% before, now it’s 19.1%. This shows that compared to the size of the economy, more loan is now being taken.

What is external debt?

External debt or foreign loan means money that India has borrowed from other countries. This loan is taken by the government, banks, and private companies.

This borrowing happens in many ways direct loans, trade credit, or selling bonds. But most of it comes from direct loans.

Loans form the biggest chunk

RBI said loans make up the biggest part of India’s foreign debt around 34%. Then comes currency and deposits (22.8%), trade credit (17.8%), and debt securities (17.7%).

This means India mostly takes money as direct loans, not through other methods. These are taken by government, banks, and private companies.

India foreign debt crosses 736 billion USD - India's Foreign Debt

Who borrowed how much

The biggest borrowers are non-financial companies around $261.7 billion. These are businesses not related to finance, like construction and manufacturing.

The Indian government has taken $168.4 billion as foreign loan. Commercial banks (excluding RBI) have taken $202.1 billion. So both public and private sectors have borrowed a lot.

India’s long-term debt

Most of India’s foreign debt is long-term. This means it doesn’t have to be repaid soon. By March 2025, $601.9 billion of the total debt was long-term. That’s about 82%.

Compared to last year, long-term debt rose by $60.6 billion. This shows India is taking more loans that have a longer repayment time. It reduces short-term pressure.

Short-term debt share falls

The share of short-term loans has come down a bit. In March 2025, it was 18.3% of total debt, while a year earlier it was 19.1%. So short-term borrowing is slightly less now.

But when short-term debt is compared to foreign exchange reserves, the ratio has slightly gone up from 19.7% to 20.1% in FY25.

US dollar still leads

More than half of India’s foreign debt is in US dollars about 54.2% as of March 2025. That means if the dollar gets stronger, loan repayments become costlier.

Next comes rupee-denominated debt (31.1%), followed by Japanese yen (6.2%), SDR (4.6%), and euro (3.2%). So currency value plays a big role in total loan calculation.

What’s behind the rise

There are many reasons behind the rise in India’s foreign debt. First, interest rates are still low in some countries, so it’s cheaper to borrow from abroad. Second, the US dollar got stronger and the rupee weakened.

RBI said currency changes added $5.3 billion to the total. If the dollar’s value hadn’t gone up, total debt would have increased by $72.9 billion but now it’s $67.5 billion.

Should we be worried?

Right now, the rise in India’s foreign debt is not a major problem. Because most of it is long-term, it doesn’t need to be repaid soon. But still, it needs to be watched.

If the dollar gets stronger again, repaying debt in rupees will cost more. That can put pressure on the economy, so the government needs to stay careful.

How it affects the common man

More foreign debt doesn’t affect people right away. But over time, it shows up in real life. Interest rates may rise, inflation may come, and jobs can be affected.

If government and companies spend more money on loan repayments, they may have less to spend on development and hiring. And if the rupee falls more, imported goods will become even costlier.

India’s way forward

India must keep an eye on its foreign loans. But debt should be used for growth like building roads, railways, and IT infrastructure. Taking loans just for small needs is not ideal.

The country must balance between foreign and local loans. That way, India can stay protected from global shocks, and the rupee can remain more stable.

FAQs

Why has India’s foreign debt increased so much in 2025?

India took new loans for government and private sector needs. Also, the stronger dollar made existing loans look costlier. Both of these raised the total debt to $67.5 billion more than last year.

What’s the difference between long-term and short-term foreign debt?

Long-term loans are paid back after more than a year. Short-term ones must be repaid within a year. Most of India’s foreign debt is long-term, which is seen as more stable.

How does foreign debt affect ordinary people?

Over time, foreign debt can weaken the rupee, raise prices of imported goods, increase interest rates, and reduce spending on public services. So it can impact inflation and jobs too.