India’s Debt Story: Growth, Cost, & What to Watch

Debt is one of the most discussed, and least calmly analysed, aspects of public finance. This post looks at India’s debt as a balance sheet item, not as a headline risk.

Debt Has Grown - Predictably

Between FY 2020-21 and FY 2024-25, total debt has increased steadily each year. Internal debt remains the dominant component. External debt is a much smaller share and has grown gradually. This is not unusual for a large, growing economy investing in infrastructure and services. In corporate terms, India has been leveraging its balance sheet to expand capacity.

The More Important Metric: Cost of Debt

What matters as much as the size of debt is its cost. The data shows that interest payments as a percentage of revenue have declined from ~39% to ~34% over the period. This is a critical stabiliser. It suggests that revenue growth has kept pace with debt servicing. Borrowing has not translated into disproportionate interest stress.

In corporate language, the company has taken on more debt, but its interest coverage has improved.

Why This Doesn’t Mean “All Clear”

Stability does not mean immunity. Interest remains, one of the largest single claims on revenue. A fixed obligation that cannot be deferred. As debt grows, interest payments will continue to compete with Social spending, Capital expenditure and Administrative needs

The balance to watch is not debt alone, but debt relative to earning capacity.

A Balanced Way to Read India’s Debt

India’s debt profile today reflects three realities:

• Borrowing has supported long-term asset creation

• Debt servicing remains manageable due to revenue growth

• Rising interest payments still narrow fiscal flexibility over time

This is neither a warning sign nor a comfort signal. It is a management challenge, much like in any large organisation.

Where This Leaves Us

India’s balance sheet is not fragile. But it is consequential. Every new borrowing decision leaves a footprint:

• On future revenues

• On future budgets

• On future policy choices

Understanding this is essential before debating deficits, giveaways, or fiscal room.

* Disclaimer *

This article represents the author’s personal analysis and interpretation of publicly available budget data. The views expressed are for informational and educational purposes only and do not constitute financial, investment, legal, or policy advice.

No responsibility or liability is accepted for any loss or damage arising from reliance on this content.

Resources & Data Reference:

Annual Financial Statements and Receipt Budget of the Government of India (FY 2020-21 to FY 2024-25), including the Assets and Liabilities Statements.

Budget documents as presented to Parliament.

Aggregations and CAGR calculations performed by the author for analytical purposes.