QUESTION

Medium

Economy

Prelims 2019

Consider the following statements:

  1. Most of India’s external debt is owed by governmental entities.
  2. All of India’s external debt is denominated in US dollars.

Which of the statements given above is/are correct?

Select an option to attempt

Explanation

The external debt of India is the total debt the country owes to foreign creditors. The debtors can be the Union government, state governments, corporations, or citizens of India. The debt includes money owed to private commercial banks, foreign governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank.

  • Commercial borrowings continued to be the largest component of external debt with a share of 37.4 per cent, followed by NRI deposits (24.1 per cent) and short-term trade credit (19.9 per cent).

  • Statement 1 is incorrect: Non-Government Debt - 416.7 (US$ billion), Government Debt 104.5 (US$ billion).

  • Statement 2 is also incorrect: US dollar-denominated debt continued to be the largest component of India's external debt with a share of 45.9 per cent at the end of December 2018, followed by the Indian rupee (24.8 per cent), SDR (5.1 per cent), yen (4.9 per cent) and euro (3.1 per cent).

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