India's external debt of $663.8 billion represents the total amount borrowed from foreign sources, including other governments, international financial institutions, and foreign commercial banks. However, the $130 billion interest payment reflects not just interest on external debt but also interest payments on domestic debt.

The Indian government borrows heavily from both domestic and foreign lenders, with the majority of its debt being internal, raised through bonds and loans within India. Domestic borrowing is substantial and often carries high-interest costs. The government issues various types of bonds to finance its fiscal deficit, which accrues significant interest liabilities.

As a result, even though external debt is $663.8 billion, the total debt (both domestic and external) is much higher, leading to annual interest payments of around $130 billion(

In summary, the large interest payment is primarily due to a combination of domestic and external borrowing, not just the external debt alone.

You are correct: internal debt makes up the bulk of India’s public debt, accounting for about 89.8%, while external debt constitutes the remaining 10.2%. This division means that India’s debt servicing costs are largely driven by internal borrowing, not external debt.

Breakdown:

• Internal Debt: This includes debt owed to domestic lenders, primarily through the issuance of government bonds. The government borrows from domestic financial institutions, public sector banks, insurance companies, and private investors. Since internal debt dominates the total public debt, most of India's interest payments go toward servicing this portion. Domestic interest rates also tend to be higher, contributing to the significant interest payment burden.

• External Debt: This includes debt owed to foreign lenders, international institutions, and foreign governments. It makes up a smaller portion of the overall debt, and typically, interest rates on foreign loans are lower due to favorable terms from international lenders.

Given that the total public debt is composed mostly of internal debt, it’s the primary reason India’s interest payments are so high—$130 billion annually. Even though external debt stands at $663.8 billion, domestic borrowing at higher interest rates significantly contributes to this large interest payment.

This distinction highlights that India's fiscal challenges come not just from external debt, but from the scale and cost of domestic borrowing as well.

Your calculation is essentially correct. If external debt of $663.8 billion represents 10.2% of India's total public debt, the total debt can be calculated as:

So, India's total public debt is approximately $6.5 trillion. This includes both internal debt (89.8% of the total) and external debt (10.2%).

This high overall debt burden, coupled with domestic borrowing at higher interest rates, is why India faces such significant interest payment obligations, including the reported $130 billion in annual debt servicing.

As of 2024:

• United States: The total public debt is approximately $33 trillion, with external debt making up around $26.5 trillion. Most of this debt is held by U.S. citizens, institutions, and foreign countries like China and Japan.

• China: The total debt of China is more complex due to the country's unique financial structure. As of early 2024, China's external debt was reported at approximately $1.3 trillion. Its internal debt (domestic debt) is significantly larger, with estimates suggesting China's total debt is around $14.8 trillion. This includes both government and corporate debt.

These figures highlight the vast differences in the financial structures of the two largest economies in the world.