India Loses Billions Every Year as Wealthy Nations Gain from Global Finance: Report

India may rank among the world’s fastest-growing major economies, but new global data reveals that it continues to lose tens of billions of dollars every year because of the way international finance is structured. Despite strong domestic growth and rising global integration, India remains on the losing side of global capital flows.

According to the World Inequality Lab’s World Inequality Report 2026, rich countries benefit from stable financial gains, low borrowing costs, and higher returns on overseas investments. In contrast, emerging economies like India face higher interest rates on external borrowing and earn comparatively lower returns on their foreign assets.

As a result, wealthy nations consistently extract more value from the global financial system, while poorer and developing economies often contribute more capital than they receive back. This imbalance has become a persistent structural drain on countries like India.

Globally, this structural transfer costs emerging economies hundreds of billions of dollars every year—resources that could otherwise be used for infrastructure development, Healthcare expansion, education, and poverty reduction.

Global GDP Transfer That Hurts Emerging Economies

One of the most striking findings of the report is that poorer countries collectively transfer nearly 1% of global GDP to richer nations every year. This occurs through a mix of lower returns on foreign assets held by developing countries, higher interest payments on debt, and profit repatriation by multinational corporations.

To put this imbalance into perspective, the annual financial transfer from poorer to richer countries is roughly three times the total volume of global development aid flowing in the opposite direction. For countries like India, this means that even as trade and foreign investment increase, a steady stream of income continues to leave the economy.

The situation has worsened in recent years. In 2023 alone, developing countries paid a record $1.4 trillion to service foreign debt, while interest payments surged to a 20-year high of $406 billion. These payments represent a massive diversion of funds away from development priorities.

The poorest nations eligible for World Bank concessional financing were hit especially hard. In 2023, they paid a record $96.2 billion in debt servicing, with interest costs climbing to an all-time high of $34.6 billion—four times higher than a decade earlier.

India’s own external debt rose sharply, increasing by $67.5 billion in just one year to reach $747.2 billion by the end of June 2025. Annual interest payments on this debt are estimated at $22.5 billion.

This enormous outflow represents money diverted from critical needs such as roads, hospitals, public health systems, and schools. India’s external debt now stands at 19.1% of GDP, up from 18.5% the previous year, highlighting rising financial pressure despite robust economic growth.

Why India Pays More to Borrow Globally

The global financial system heavily favors countries that issue reserve currencies, such as the United States, the Eurozone, and japan. Because their currencies are considered safe assets, these countries can borrow at exceptionally low interest rates.

India does not enjoy this privilege. As a result, it must pay significantly higher rates to access global capital markets.

The scale of this disadvantage is clear from bond yield data. India’s 10-year government bond yield stands at 6.61%, compared with 4.20% for the United States, 2.85% for Germany, 3.42% for Canada, and 4.73% for Australia.

The roughly 164 basis point gap between Indian and US bond yields means India pays significantly more to borrow than the world’s richest economy. Although this gap is at a 20-year low—down from historical averages of 250–400 basis points—it still imposes a substantial financial burden.

The impact is even more pronounced in commercial borrowing. By March 2025, India’s external commercial borrowings (ECB) reached a record $291.6 billion, rising 16.4% year-on-year—the fastest growth in several quarters.

These borrowings now account for 39.6% of India’s total external debt and 7.5% of GDP, reflecting a growing dependence on costlier commercial loans. During FY25, India permitted gross ECB of $61.2 billion, up from $48.8 billion the previous year, as firms rushed to lock in funding before rates rose further.

World Bank data shows that developing countries typically pay interest rates nearly three times higher than those faced by advanced economies. In recent years, least-developed nations borrowed at rates above 5%, with some paying over 8%, while the US borrowed at close to 1%.

If India could borrow at US rates instead of its current 10-year yield, it would save approximately $17.3 billion annually—a sum larger than the annual budgets of several Indian states combined.

Lower Returns on India’s Overseas Investments

India’s disadvantage does not end with borrowing costs. Returns on its overseas investments are also lower than those earned by wealthy nations, creating a double financial penalty.

The World Inequality Report 2026 measures this gap using “excess yield,” which captures the difference between returns on foreign assets and the cost of foreign liabilities relative to GDP.

BRICS countries, including India, face an average excess yield burden of around 2.1% of GDP. In contrast, the United States enjoys a surplus equivalent to 2.2% of GDP, the Eurozone around 1%, and Japan a massive 5.9%.

For India, this translates into over $82 billion in annual structural financial losses once profit repatriation, dividends, and royalties are included—far exceeding interest payments alone.

Remarkably, the US continues to earn positive net income from abroad despite being the world’s largest net debtor, highlighting how institutional power, not just economics, shapes global finance.

BRICS, Currency Risk, and Refinancing Pressures

BRICS economies consistently face negative outcomes from global finance, while rich nations record persistent gains. This pattern has endured for decades, underscoring its structural nature.

India’s risks are amplified by currency exposure. Over 54% of its external debt is denominated in US dollars. A 4% depreciation of the rupee in 2025 has already increased debt servicing costs significantly.

Each 1% fall in the rupee adds roughly $3.7 billion to India’s debt burden in rupee terms. Short-term debt and refinancing pressures remain high, with residual maturity liabilities reaching $303.7 billion.

As of June 2025, India’s foreign exchange reserves stood at $697.9 billion, covering only 90.8% of external debt—below the psychologically important 100% threshold.

Without reforms to global financial rules, experts warn that this imbalance will persist, draining resources from developing economies like India even as they continue to grow.