How Much Debt Does India Have?

India’s national debt is a comprehensive measure of the financial obligations accumulated by the government over time. This debt can broadly be categorized into public debt, which refers to liabilities owed by the central and state governments, and external debt, representing borrowings from foreign entities. Understanding these components is important for assessing the financial health of the nation.

India’s Overall Debt Magnitude

India’s total debt, encompassing both internal and external borrowings, is estimated to be around ₹181.68 trillion by March 2025. The total outstanding debt was approximately ₹168.72 trillion in March 2024, indicating a continuous increase in the country’s financial obligations.

Public debt primarily refers to the central government’s liabilities, funded through the Consolidated Fund of India. As of March 2025, India’s total internal debt stood at approximately ₹166.57 trillion.

External debt reached approximately $736.3 billion by the end of March 2025. The government’s borrowing activities are essential for funding development initiatives and managing fiscal deficits.

Composition of India’s Debt

India’s public debt is predominantly internal, with domestic borrowings constituting over 93% of the central government’s total public debt. The central government raises these funds through various financial instruments, primarily dated government securities and treasury bills, which are issued in the open market through auctions. These marketable securities form a significant portion of internal debt, alongside non-marketable instruments.

Non-marketable internal debt includes treasury bills issued to state governments, commercial banks, and other investors, as well as non-negotiable, non-interest-bearing rupee securities provided to international financial institutions. Other liabilities, such as oil and fertilizer bonds, also contribute to the central government’s overall liabilities. The Union government has reduced its reliance on foreign loans.

State governments also contribute significantly to the overall public debt, accounting for nearly one-third of the total. Their liabilities have increased due to initiatives like the issuance of Ujwal Discom Assurance Yojna (UDAY) bonds. States are required to obtain consent from the central government for new loans if they have outstanding liabilities to the latter.

India’s external debt, while smaller than internal debt, is diversified across various borrower types and instruments. As of March 2025, non-financial corporations held the largest share of external debt at 35.5%, followed by deposit-taking corporations at 27.5%, and the general government at 22.9%.
Loans constituted the largest component of external debt by instrument:
Loans (34%)
Currency and deposits (22.8%)
Trade credit and advances (17.8%)
Debt securities (17.7%)

The US dollar accounted for 54.2% of India’s external debt, with the Indian rupee at 31.1%, and smaller proportions in Japanese yen and Special Drawing Rights (SDRs). External debt is also categorized by maturity: long-term debt (over one year) stood at $601.9 billion and short-term debt (up to one year) at $134.5 billion by March 2025.

Debt Metrics and Trends

Key metrics are used to evaluate the sustainability of a country’s debt, with the debt-to-Gross Domestic Product (GDP) ratio being a primary indicator. This ratio compares a country’s total debt to its economic output, providing insight into its ability to manage and repay its obligations. For the central government, the debt-to-GDP ratio is estimated at 57.1% for the fiscal year 2024-25 and is projected to decrease to 56.1% in 2025-26.

The Indian government aims to reduce the central government’s debt-to-GDP ratio to 50 ± 1% by March 31, 2031. The combined debt of central and state governments resulted in a general government debt-to-GDP ratio of 81.59% in 2023. This ratio peaked at 89.45% in 2020, influenced by increased spending during the COVID-19 pandemic.

India’s external debt-to-GDP ratio stood at 19.1% at the end of March 2025, a slight increase from 18.5% in March 2024. Over the past decade, this ratio has averaged around 20.3%. While the absolute amount of external debt has risen, the ratio relative to GDP has remained relatively stable, fluctuating within a range of 18-20%.

Trends in India’s debt metrics are influenced by several factors, including economic growth rates, fiscal deficits, and exchange rate movements. A robust economic growth rate helps in reducing the debt-to-GDP ratio by increasing the denominator. Fiscal deficits, which represent the difference between government spending and revenue, necessitate borrowing and thus contribute to debt accumulation.

The government has committed to reducing its fiscal deficit, targeting 4.8% of GDP for FY 2024-25 and further projecting a reduction to 4.4% in FY 2025-26. Exchange rate fluctuations can also impact the value of external debt, particularly debt denominated in foreign currencies like the US dollar. For instance, the appreciation of the US dollar against the Indian rupee can increase the repayment burden of dollar-denominated debt.