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Q63 (IAS/2019) Economy › External Sector & Trade › External debt dynamics Official Key

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?

Result
Your answer: —  Âˇ  Correct: D
Explanation

The correct answer is option D - Neither statement 1 nor 2 is correct.

**Statement 1 is incorrect** because non-government debt is generally much higher than the government debt[2]. The documents clearly show that in 2022, out of India's total external debt of $610.5 billion, sovereign debt was only $124.5 billion (3.9% of GDP) while non-sovereign debt was $486 billion (15.3% of GDP)[3]. This means most of India's external debt is actually owed by non-governmental entities like corporates, not by the government.

**Statement 2 is incorrect** because India's external debt is denominated in multiple currencies, not just US dollars. India's external debt includes US Dollar denominated (55.5%), Indian Rupee denominated (30%), and then some is SDR, Yen, Euro[3]. While US dollars constitute the largest share, it accounts for only about 55-56% of the total, with significant portions in Indian Rupee and other currencies.

Therefore, both statements are incorrect, making option D the right answer.

Sources
  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 16.18 Indian Economy > p. 486
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 16.18 Indian Economy > p. 486
  3. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 163
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Q. Consider the following statements : 1. Most of India's external debt is owed by governmental entities. 2. All of India's external debt is…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 ¡ 0/10
You're seeing a guest preview. The Verdict and first statement analysis are open. Login with Google to unlock all tabs.

This is a foundational static economy question derived directly from standard textbooks and the Economic Survey. It tests basic structural knowledge of India's Balance of Payments. Missing this indicates a failure to read the 'composition' tables in your primary source.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
What percentage or share of India's external debt is owed by governmental entities (central and state governments and public sector) as of the latest available data?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 163
Presence: 5/5
“2022, external debt of India was $610.5 Billion (19.2% of GDP). $610.5 billion = 19.2% of GDP "Sovereign Debt" | "Non-Sovereign Debt" • $124.5 billion (3.9% of GDP) | $486 billion (15.3% of GDP) • Sovereign Debt is also called Govt. of India | It includes • (external) Debt • (State Govt. external debt is in the name of |  Commercial Borrowing • GoI only) |  External Commercial Borrowing ECB • plus FII investments in Indian • It includes | corporate bonds FPI/FII investments in G-securities Loans under Bilateral Assistance |  NRI Deposits Loans under Multilateral Assistance • India's external debt can also be classified as 'short-term' (21.6%) and long-term debt.• Commercial borrowings remained the largest component of external debt followed by non-resident deposits.• Currency wise, India's external debt includes: • o US Dollar denominated (55.5%)• o Indian Rupee denominated (30%)• o And then some is SDR, Yen, Euro.”
Why this source?
  • Gives a numeric total external debt ($610.5 billion) and a clear sovereign (government) vs non‑sovereign split ($124.5B sovereign; $486B non‑sovereign).
  • Enables direct calculation of government share ≈ 124.5 / 610.5 ≈ 20.4% of total external debt.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 16.18 Indian Economy > p. 486
Presence: 4/5
“• In 2019-20, ECBs remained the largest component of India's external debt, with a share of 38 per cent, followed by NRI deposits (23.2%). • In 2020-21, US dollar-denominated debt continued to be the largest component of India's external debt with a share of 53.9 per cent at the end of June 2020, followed by the Indian Rupee (31.6%), Japanese Yen (5.7%), SDR (4.5%) and Euro (3.5%). • Non-government debt is generally much higher than the government debt.”
Why this source?
  • Explicitly notes that non‑government debt is generally much higher than government debt, corroborating that the government share is a minority portion.
  • Provides contextual support that the bulk of external debt is non‑sovereign, consistent with the numeric split in index 2.
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