Factors Affecting External Debt of India

The external debt has become a world-wide phenomenon and is crucial factor in any economy whether poor and developing or developed. It is the intention of this article to analyze the external debt and its effects on other important parameters of economy on domestic and international level. All these economic parameters are so intertwined with each other that any change in one parameter affects three or four other parameters. Effort is made to examine and observe India’s economic scenario in the light of this analysis in context of persistent global volatility.

Objective: To analyze the factors affecting India’s external debt and their causal relationship with each other and external debt.

Method and Statistical Analysis: The analysis is mainly based on widely accepted granger casualty test and multiple regressions co-efficient. The correlation coefficient matrix is used to find out the relationship of all the variables amongst themselves and with external debts. The period of data is covered for a span of more than 20 years from 1991 to 2015. The source of data is RBI, department of economic affair of government of India, economic survey’s government of India, and balance of payment manual 5th addition international monitory fund.

Findings: The best route to achieve total overall growth and making any country’s economy healthy and resonating goes through its own natural resources, demographic strengths, its plus and minuses. No country can progress bypassing its strengths and by ignoring its own individuals. Economic progress can only be achieved by formulating growth and development policies “by the people, of the people, and for the people”. Considering the global volatility, the policy guidelines for Indian economy should be to strengthen its strong hold like agriculture and abundant natural resources. Developing agricultural sector would enhance the GDP and the same time will strengthen the Indian economy there by providing a healthy market environment for investors abroad. The basic focus of Indian economy should be towards developing every individual and should not be totally market oriented. The make in India, Skill India, startup India and Stand up India are some of the steps that would help Indian economy to go all out for overall sectorial development and march towards self-reliance.

Application: The findings can be used by government, RBI and government agencies involved in economic policy formulation to achieve overall economic growth and to realize the goal of India’s self-reliance.