India Loses Billions Annually Due To Global Financial Asymmetry: World Inequality Report

New Delhi, Dec 19 (KNN) India loses billions of dollars each year due to structural imbalances in the international financial system, according to the World Inequality Report 2026 released by the World Inequality Lab.

The report highlights that developing countries like India pay higher interest on external borrowings while earning lower returns on overseas investments.

India’s External Debt Position

For India, external debt stood at USD 747.2 billion at the end of June 2025, an increase of USD 67.5 billion over one year. Annual interest payments on this debt are estimated at USD 22.5 billion. 

External debt now accounts for 19.1 percent of GDP, up from 18.5 percent the previous year. The report notes that these outflows represent resources that could otherwise be invested in infrastructure, healthcare and education.

Higher Borrowing Costs than Advanced Economies

The global financial system continues to favour countries that issue reserve currencies such as the US dollar, euro and Japanese yen. As a result, India faces higher borrowing costs in international markets. India’s 10-year government bond yield stands at 6.61 per cent, compared to 4.20 per cent in the US.

Growing Reliance on Commercial Borrowings

India’s external commercial borrowings (ECB) reached a record USD 291.6 billion in March 2025, growing 16.4 percent year-on-year. ECBs now constitute 39.6 percent of total external debt and 7.5 percent of GDP, reflecting increasing dependence on higher-cost commercial credit.

In FY25, India approved USD 61.2 billion in gross ECBs, up from USD 48.8 billion the previous year, as firms sought overseas funding amid expectations of rising global interest rates.

India also earns lower returns on its overseas investments compared to advanced economies. The report introduces the concept of ‘excess yield’, the gap between returns on foreign assets and the cost of foreign liabilities.

BRICS countries, including India, face an average burden of 2.1 percent of GDP due to this asymmetry. For India, this translates into an estimated USD 82 billion in annual structural financial losses, including interest payments, dividend outflows, royalties and profit repatriation.

The report says growth alone cannot overcome the structural disadvantage facing countries like India, warning that without reforms to global financial rules, credit ratings and reserve currency dominance, developing economies will continue to see net outflows.

(KNN Bureau)