Determinants of India’s external debt

2021, Vol. 3, Issue 2

Determinants of India’s external debt

authors
Poonam Arora

abstract
External debt plays an important role in overall growth and development of a nation. It gives a shape to the economic activities of a country. External debt is more crucial or important for any developing country like India where there is always a saving investment gap. In such a country to finance viable or profitable investment opportunities, the only source is external debt either through ECBs, trade credits, loans from government of another country or other financial institutions. In the present paper, we have tried to come up with the various factors or macroeconomic variables affecting external debt. The period of data covered is 7 years from 2013-14 to 2019-20. The source of data is official website of RBI. For determining the factors affecting external debt of India, we have applied multiple regression model, with the help of which we concluded that different macroeconomic variables like trade balance, exchange rate, foreign exchange reserve etc. affect external debt. Beside all these variables, time is also one of the important factors affecting external debt. From analysis, we concluded that various macroeconomic variables affect the level of external debt. Therefore, given the other independent variables like forex reserve, exchange rate, trade balance and time period, we can predict the value of external debt to GDP ratio. Then paper also deals with testing of efficacy of multiple regression model and we found that model is highly reliable and efficient.

Download | Pages : 01-06

How to cite this article:

Poonam Arora. Determinants of India’s external debt. International Journal of Commerce and Economics, Volume 3, Issue 2, 2021, Pages 01-06