Public debt in India


Public Debt in India

Public debt is the debt owed by the central government. Among the non-tax sources, the major source of government revenues is public debt.

What's included in Public debt?

Central Government’s public debt comprises Internal debt, External debt, and Other liabilities.

Internal Debt:

The internal debt is classified into:

1) Market loans,
2) other long and medium term borrowings, and
3) short-term borrowings all of which are shown under the receipts side of the central budget.

They include special securities and T-bills issued to RBI, state governments, commercial banks and other financial institutions.

External Debt:

Represents loans received from foreign governments and International Financial Institutions. In general, external debt means what the nation owes to foreign lenders- includes private sector borrowings too. However, in the public debt part of external debt, it includes what the government owes to lenders inside and outside the country.

Other Liabilities:

Includes other interest bearing obligations of the government such as:

1) Post office savings deposits under small saving schemes, loans raised through post office cash certificates, etc.
2) provident funds,
3) Interest bearing reserve funds of departments like railways and telecommunications, etc.

The obligations of ‘other liabilities’ are met by the Public Account, just as the internal and external debts are secured under the Consolidated Fund. ‘

India recorded a Government Debt to GDP of about 66 percent of the country's Gross Domestic Product in 2015. Generally, Government debt as a percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting the country’s borrowing costs and government bond yields. It is therefore crucial to be prudent in borrowing to ensure the credit worthiness of the country.

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