The Impact of External Debt on the Indian Economy - An Analytical Study

External debt provides the necessary capital to the government for its economic activities. If the borrowed funds are not utilised properly for asset building activities it would definitely increase the burden of repayment on the government. This research focused on understanding the movement and the growth rate of the foreign debt of India over the years from 2000 till 2022. For this purpose, the statistical information was collected from the RBI and the World Bank Group. In order to know the trend of the various elements of India’s external debt; Percentage Analysis was calculated. Ratio of external debt to Gross Domestic Product, short as well as long-term external debt as a ratio of total external debt of India was done. Cross correlation was determined to assess the degree of correlation; the outcome confirmed that GDP and foreign debt are directly proportionate to each other and are highly positively correlated too. The conclusion showcased that external borrowings will increasingly and positively affect economic growth if debts are managed judiciously and are invested in self-liquidating developmental projects.