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 ✓ UPSC's answer
Why the answer is (d)
• Statement 1 is wrong: most of India's external debt is owed by the private sector — commercial borrowings, NRI deposits and trade credit account for the bulk; government (sovereign) debt is only about a fifth.
• Statement 2 is wrong: while the US dollar dominates (about 50%), India's external debt is also denominated in rupees (about 36%), SDRs, yen and euro.
• India's external debt was about USD 543 billion in March 2019, roughly 20% of GDP.
• Hence neither 1 nor 2, option (d).
Why the other options are wrong
- (a) 1 only
- Statement 1 is wrong: private entities owe most external debt.
- (b) 2 only
- Statement 2 is wrong: debt is in several currencies including rupees.
- (c) Both 1 and 2
- Both statements are wrong.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2019, held on 2 June 2019. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.