The foreign debts of Indian businesses decreased in 2024 from $29.22 billion in total loans to $23.33 billion representing a 20.2% drop. According to them, India is currently experiencing depreciation of its currency which has led to high repayments which makes it advisable to not take further corporate debts.

Foreign loans more than doubled from $14.38 billion in 2022 to $29.22 billion in 2023 which is more than a one‐decade high. This comes as a surprise to many as we expected foreign loans not to get even close to the levels they reached.

Many monetary experts, have sighted the depreciation of the Irupee and the rising inflation costs as the main reasons many would be deterred from seeking foreign loans during periods upto 2025. The reserve currency has significantly inflated cost as opposed to local currency.

They say that a fall in the value of rupee poses a serious risk to companies which do not have some sort of loan forward cover, but according to the bankers, Business Standard report, export orientated businesses such as Reliance Industries are able to weather the storm better since they generate significant dollars and thus ‘self-hedge’ to some extent.

Currently as on January 14, the rupee has slumped 4.4 percent against the US dollar, and finally looks to close 2024 at 85.57 due to the negative impact from 83.48 in September.

A senior treasury executive at a state owned bank observed that it would become expensive for companies with lesser natural hedges to source foreign currency funds. He stated that, ‘Forward cover prices will go up. Also, companies will have to shell out more rupees for buying a dollar at the time of repayment if the currency falls further, which mutes any plans to structure through a reverse tap issue.’

Bankers are of the view that the pace of foreign borrowing is already declining due to global market volatility and corporate conservatism. This served to substantiate one banker’s report that commented on how “the course of US diplomacy with the new Donald Trump administration will be crucial for companies that want to raise money abroad”.

Exports of IT services, pharmaceuticals, clothing, and textiles are done ny these industries that can be competitive in terms of costs due to depreciation of the currency. After payment for imports, these companies which bring in large dollar earnings are able to earn profits.