Consider the following statements:
- Most of India’s external debt is owed by governmental entities.
- All of India’s external debt is denominated in US dollars.
Which of the statements given above is/are correct?
Detailed Explanation:
Answer: Option 4 — Neither 1 nor 2
Both statements about India's external debt are incorrect. Most of India's external debt is owed by non-governmental entities (commercial borrowings, NRI deposits, and trade credit account for the majority), while government debt constitutes a smaller portion. Additionally, India's external debt is denominated in multiple currencies, with US dollar being the largest but not the only component.
❌ Statement 1 – Incorrect: Non-governmental debt (US$ 416.7 billion) far exceeds governmental debt (US$ 104.5 billion), making most external debt non-governmental in nature.
❌ Statement 2 – Incorrect: While US dollar-denominated debt is the largest component (45.9%), India's external debt is also denominated in Indian rupee (24.8%), SDR (5.1%), Japanese yen (4.9%), euro (3.1%), and other currencies.
📝 Short Notes: India's External Debt
| Component | Details |
|---|---|
| Definition | Total debt owed by India to foreign creditors (private banks, foreign governments, IMF, World Bank, etc.) |
| By Debtor Type | Non-Government Debt: ~80% (US$ 416.7 billion) Government Debt: ~20% (US$ 104.5 billion) |
| By Components | Commercial Borrowings: 37.4% NRI Deposits: 24.1% Short-term Trade Credit: 19.9% Others: Balance |
| Currency Composition | US Dollar: 45.9% Indian Rupee: 24.8% SDR: 5.1% Japanese Yen: 4.9% Euro: 3.1% Others: Balance |
| Key Debtors | Union Government, State Governments, Corporations, Indian Citizens |
Question 4 of 12 Balance of Payments
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