India’s external financial health improves marginally in Q1 FY27 amid global headwinds

India's external financial health saw a slight improvement in the first quarter of fiscal 2027, according to data from the Reserve Bank of India, despite global headwinds. The country's external debt to GDP ratio slightly decreased to 20.8% from 20.9% a quarter earlier, as external debt rose by $15.4 billion to $778.2 billion by the end of June. The gap between India's international liabilities and assets widened to $220 billion by June, but this figure had been on a declining trend over the past year.

Long-term debt with maturities exceeding one year increased to $624.7 billion, up by $11.2 billion from the end of March 2026. Loans constituted the largest portion of external debt at 34.3%, while currency and deposits accounted for 22.2%, trade credit and advances made up 19.1%, debt securities held 16.5%, and other global currencies and special drawing rights accounted for the remaining 8.1%.

In terms of currency composition, US dollar-denominated debt accounted for 54.8% of India's external liabilities, followed by rupee-denominated debt at 29.8%. The remaining portion is in currencies like the yen and euro and in special drawing rights. Valuation gains from the US dollar's appreciation against other major currencies totaled $0.9 billion, excluding which, external debt would have increased by $16.4 billion instead of the reported $15.4 billion.

At a micro level, net claims of non-residents from India, indicating the financial gap between foreign-owned assets in India and Indian-owned assets abroad, increased by $16.5 billion to $220.3 billion by the end of June 2026. This rise is mainly due to an increase in external liabilities by $11.6 billion and a decrease of $4.9 billion in foreign-owned assets.

Foreign liabilities of Indian residents also grew, primarily due to increased direct investment of $15.7 billion and other investments compensating for the decline in portfolio equity investments of $14 billion.

Meanwhile, invisible receipts, which reflect foreign exchange earnings from intangible services, investments, and remittances, rose to $163 billion in the first quarter, compared to $144 billion in the same period last year. In services trade, India earned $35.5 billion from exports in August, against import payments of $18.9 billion.