India’s forex reserves sufficient to cover 90% of external debt

Forex

India’s foreign exchange reserves are sufficient to cover 90 percent of external debt and provide an import cover of more than 10 months, the Economic Survey 2024-2025, which was released on January 31, has said.

The external debt to GDP ratio rose from 18.8 percent of the GDP at the end of June to 19.4 percent at the end of September, the document, the official report card of the state of the country’s economy, said.

However, the share of short-term debt (with original maturity of up to one year) in total external debt decreased to 18.8 percent at the end of September from 19.4 percent in June.

External debt ratio to foreign exchange reserves decreased to 18.9 percent at the end of September 2024 from 20.3 percent at the end of June.

India’s foreign exchange reserves increased from $616.7 billion at the end of January to $704.9 billion in September before moderating to $634.6 billion on January 3, 2025.

The moderation was on account of timely intervention by the Reserve Bank of India (RBI) in the forex market to defend the rupee against a sharp fall.

Due to this, the Indian rupee has remained one of the least volatile currencies among peers.

In the first nine months of FY25 (up to January 6, 2025), the rupee depreciated a modest 2.9 percent, performing better than currencies such as the Canadian dollar, South Korean won and the Brazilian real, which depreciated 5.4 percent, 8.2 percent and 17.4 per-cent, respectively, during the period.

One of the primary factors behind the rupee depreciation during 2024 has been the broad-based strengthening of the dollar amid geopolitical tensions in the Middle East and uncertainty surrounding the US election, the Economic Survey said.