Is India in Debt? A Breakdown of Its National Debt

National debt represents the total financial obligations a country’s government owes to its creditors. This accumulation of borrowings is crucial for funding public services, infrastructure development, and economic stabilization efforts. Understanding a nation’s debt provides insight into its financial health and its capacity to meet future commitments. Examining India’s national debt helps to clarify its current economic standing and the strategies it employs for fiscal management.

What is National Debt

National debt specifically refers to the debt accumulated by a country’s central government. This is distinct from private debt, which encompasses borrowings by corporations and households. While private debt plays a significant role in the overall economy, discussions of national debt typically focus on the government’s liabilities.

National debt can be further categorized into internal and external debt. Internal debt is owed to domestic creditors, such as a country’s own citizens, banks, and financial institutions. External debt, conversely, is owed to foreign entities, including international organizations, foreign governments, and overseas investors. The distinction between these two forms of debt is important for assessing a country’s vulnerability to global economic fluctuations and currency risks.

India’s Debt Composition

India’s total national debt, encompassing both central and state government liabilities, was estimated to be around ₹181.68 trillion (approximately $2.091 trillion) as of early 2025. This figure includes liabilities from both domestic and foreign sources. The central government’s debt alone reached $2,144.6 billion in September 2024.

A significant portion of India’s public debt is internal, meaning it is owed to creditors within the country. Internal debt constituted over 93% of the overall public debt as of April 2024. For the central government, internal debt and other liabilities were estimated at ₹175.56 lakh crore as of March 31, 2025. Major holders of this domestic debt include commercial banks, holding around 38% of outstanding securities, and insurance companies alongside provident funds, collectively owning 30%. The Reserve Bank of India also accounts for a substantial 16% of debt ownership, indicating that government-owned financial institutions are key financiers of the nation’s debt.

The external component of India’s debt is considerably smaller. India’s external debt amounted to $663.8 billion as of March 2024. This external debt is primarily denominated in US dollars, accounting for 53.8% of the total, followed by the Indian rupee at 31.5%. The majority of India’s external borrowings originate from multilateral institutions such as the International Monetary Fund (IMF), World Bank, and Asian Development Bank. Bilateral lenders and commercial borrowings also contribute to the external debt portfolio.

Key Debt Metrics

The Debt-to-GDP ratio is a primary measure, indicating a country’s total debt relative to its economic output. India’s general government debt, combining both central and state liabilities, stood at nearly 82% of its Gross Domestic Product (GDP) as of July 2024. For the central government specifically, its debt accounted for 57.2% of nominal GDP in September 2024. This ratio helps assess a nation’s capacity to service its debt through its economic activity.

Another important metric is the fiscal deficit, which occurs when government expenditures exceed its total revenue. For the financial year 2024-25, India’s central government fiscal deficit was 4.8% of GDP. The government has set a target to reduce this to 4.4% of GDP for the financial year 2025-26. The overall general government fiscal deficit, which includes both central and state deficits, was down to 7.8% as of August 2025. This combined deficit is projected to decline gradually to 6.6% of GDP by fiscal 2029.

The revenue deficit is a subset of the fiscal deficit, indicating the shortfall when current expenditures (excluding capital outlays) are greater than revenue receipts. For the central government, the revenue deficit was ₹5.67 lakh crore, representing 92.9% of the budget target for FY25. Managing these deficits is crucial for maintaining fiscal stability and controlling the growth of national debt.

India’s Debt in Global Perspective

India’s overall Debt-to-GDP ratio, which includes both central and state government debt, was around 83.1% in 2024 according to IMF data. This places India’s ratio higher than the average for many emerging economies, where the Debt-to-GDP ratio is closer to 60%.

However, India’s debt profile differs from some advanced economies. For instance, countries like the United States had a Debt-to-GDP ratio of 121.0% in 2024, the United Kingdom 101.8%, Japan 251.2%, and Italy 136.9%. While these figures are higher than India’s, the economic structures and borrowing capacities of advanced economies often differ significantly from emerging markets. India’s substantial reliance on internal debt, with over 93% of its public debt held domestically, also provides a degree of insulation from external shocks compared to countries heavily reliant on foreign borrowings. The government’s focus on fiscal consolidation, aiming to reduce its fiscal deficit, is a step towards improving its debt sustainability over the long term.