In the 2019 Bimal Jalan Committee report on the RBI’s capital framework, it was highlighted that during the 2008 financial crisis, the RBI had more than adequate reserves to cover India’s external debt. The report stressed the importance of monitoring this ratio to ensure sufficient foreign exchange (FX) coverage for external liabilities.
As of March 2024, India’s external debt stands at approximately $664 billion. Assuming a 5-6% increase since then, the current debt could be close to $700 billion. With the RBI’s current FX reserves at $693 billion, these reserves now cover nearly 100% of the external debt.
Since 2019, we have been tracking this metric to gauge the RBI’s capacity for intervention. We recommend that you also monitor this ratio, as it serves as a key indicator of financial resilience. While other factors—both global and domestic—can influence the situation, maintaining a strong reserve-to-debt ratio is crucial for managing external risks.
As of March 2024, India’s external debt stands at approximately $664 billion. Assuming a 5-6% increase since then, the current debt could be close to $700 billion. With the RBI’s current FX reserves at $693 billion, these reserves now cover nearly 100% of the external debt.
Since 2019, we have been tracking this metric to gauge the RBI’s capacity for intervention. We recommend that you also monitor this ratio, as it serves as a key indicator of financial resilience. While other factors—both global and domestic—can influence the situation, maintaining a strong reserve-to-debt ratio is crucial for managing external risks.