Influence of Foreign Commercial Debt on India’s Macroeconomic Outcomes

Ms. Prachi Agarwal; Dr. Swami Prasad Saxena

doi:https://doi.org/10.17492/jpi.manthan.v13i1.1312610

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Influence of Foreign Commercial Debt on India’s Macroeconomic Outcomes

Prachi Agarwal, Swami Prasad Saxena

https://doi.org/10.17492/jpi.manthan.v13i1.1312610

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Published Online: June 05, 2026

Author Details ( * ) denotes Corresponding author

1. * Prachi Agarwal, research Scholar, applied business economics, dayalbagh educational institute, Agra, Uttar Pradesh, India (prachiagarwal62@gmail.com)

2. Swami Prasad Saxena, Professor, Applied Business Economics , Dayalbagh Educational Institute, Agra, Uttar Pradesh, India (spsaxena@dei.ac.in)

External Commercial Borrowings (ECBs) have grown considerably and acted as one of the main players of the international capital market. Although ECBs make long-term funding more affordable, it exposes the economy to risks including interest rate risks, currency rate swings, and repayment risks. This paper attempts to delineate the impact of ECB inflows on India’s macroeconomic performance. The results of VECM show that all the macroeconomic performance indicators (dependent variables) have a long run association with ECB inflows. But, in the short run, none of them (except employment) have been found to have relationship with ECB inflows. The results of variance decomposition suggest that ECB inflows in India have a significant impact on external debt stock, employment, and foreign exchange rates only.

Keywords

External Commercial Borrowings (ECBs); Foreign exchange rate; Index of industrial production; Vector Error Correction Model (VECM); Johanson cointegration

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