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?
A
1 only
B
2 only
C
Both 1 and 2
D
Neither 1 nor 2
Correct Answer
Explanation
Option (d) is correct because non-government debt (primarily External Commercial Borrowings and NRI deposits) constitutes the majority—roughly 80%—of India’s external debt, and it is denominated in multiple currencies including the Indian Rupee, SDR, and Yen. Statement 1 is a common trap because, while the government is a major borrower, private sector liabilities are significantly higher in the overall debt profile. The core concept tested is the classification and currency composition of India’s external debt.
External SectorExternal Debt CompositionIndia's external debtgovernmental entitiesUS dollarsdenominatedpublic debtprivate debt