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EFFECT OF INDIA`S EXTERNAL INDEBTEDNESS UNDER THE NEW ECONOMIC POLICY - A PRAGMATIC VIEW

Journal: International Journal of Management (IJM) (Vol.12, No. 7)

Publication Date:

Authors : ;

Page : 1-9

Keywords : external debt; multiple regression; debt to GDP; trade balance to GDP; exchange rate; depreciation of the currency;

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Abstract

External debt plays a vital role in the overall growth and development of a nation. It gives a shape to the economic activities of a country. External debt is more crucial for any developing country like India, where there is always a saving-investment gap. To finance viable or profitable investment opportunities in such a country, the only source is external debt either through ECBs, trade credits, loans from the government of another country, or other financial institutions. In the present paper, we have tried to develop the various factors or macroeconomic variables affecting external debt. The period of data covered is seven years from 2013-14 to 2019-20. The source of Data is the official website of RBI. To determine the factors affecting India's external debt, we have applied a 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. Besides all these variables, time is also one of the essential 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 period, we can predict the value of external debt to GDP ratio. The paper also deals with testing the efficacy of the multiple regression model, and we found that the model is highly reliable and efficient.

Last modified: 2021-07-24 18:19:59