During recent years, public debt in India has been growing at an
alarming rate. The under developed nature of the economy &
institutional credit deficiencies makes the financing of economic
development a complicated problem. Hence the government has to play a key role in stimulating the rate
of capital formation & in promoting the economic development of the
economy.
So public debt can be used by the government as means for mobilising the resources.
The following are the various components of internal debt.
1. Market Loan
These have a maturity period of 12 months or more at the time of issue and are generally interest bearing. The government issues such loans almost every year. These loans are raised in the open market by sale of securities or otherwise. Total market loans as at the end of March 2005 are estimated at Rs. 7,58,999 crores.
2. Bonds
The Government borrows funds by way of issue of bonds. The government obtains funds through the issue of bonds such as National Rural Development Bonds, Central Investment Bonds. The bonds are issued at different maturity periods, which may range from 3 years to 10 years period. They provide medium-term to long-term funds to the government.
3. Treasury Bills
A major source of short-term funds for the government is obtained by issue of treasury bills. At present, government issues 91 day and 364 day treasury bills. The treasury bills are purchased by commercial banks and others.
4. Special Floating and Other Loans
These represents India's contribution towards share capital of international financial institutions like IMF, World Bank, International Development Agency and so on. These are non-negotiable and non-interest bearing securities. The Government of India is liable to pay the amount at the call of these institutions. Accordingly, it is a short-term debt upon the Government of India.
5. Special securities issued by RBI
The government obtains temporary loans for a period of maximum 12 months from RBI and issues special securities, which are non-negotiable and non-interest bearing. Such securities provide short term funds to the Government.
6. Ways and Mean Advances
The Government of India obtains ways and means advances from the Reserve Bank of India to meet its short period expenditure. These debts are purely temporary in nature and are usually repaid within three months.
7. Securities against small savings
Since 1999-2000, under the new accounting system, national small savings have been converted into the Central Government securities. As a result there has been a sharp increase in internal debt and corresponding decline in small savings.
The government of India has raised foreign loans from U.S.A, U.K, France, U.S.S.R, Japan, etc.
External Debt rose from Rs. 31,525 crores in 1990-91 to Rs. 68,392 crores in 2005-06.
The external debt can be broadly divided into two groups :
A. Long term debt :
It is to be noted that the overall external debt of India comprises of Government debt and Non-government debt. The Government debt is owed by Govemment authorities, both Central and State Governments, whereas the non-Government debt is owed by private parties in India. In terms of composition, India's external debt has shifted in favour of private debt over the last decade.
1. Small Savings
In recent years small savings have increased due to rising money income in the economy.
Recently the Government of India launched a number of small savings instruments. These include 9% Relief Bonds 1987, Kisan Vikas Patras, Indira Vikas Patras, etc.
2. Provident Funds
Provident funds are divided into two categories :-
4. Reserve Funds and Deposits
Reserve Funds and Deposits are divided into two categories :-
So public debt can be used by the government as means for mobilising the resources.
Internal Debt
The internal debt is a major component of public debt of the central government of India.The following are the various components of internal debt.
1. Market Loan
These have a maturity period of 12 months or more at the time of issue and are generally interest bearing. The government issues such loans almost every year. These loans are raised in the open market by sale of securities or otherwise. Total market loans as at the end of March 2005 are estimated at Rs. 7,58,999 crores.
2. Bonds
The Government borrows funds by way of issue of bonds. The government obtains funds through the issue of bonds such as National Rural Development Bonds, Central Investment Bonds. The bonds are issued at different maturity periods, which may range from 3 years to 10 years period. They provide medium-term to long-term funds to the government.
3. Treasury Bills
A major source of short-term funds for the government is obtained by issue of treasury bills. At present, government issues 91 day and 364 day treasury bills. The treasury bills are purchased by commercial banks and others.
4. Special Floating and Other Loans
These represents India's contribution towards share capital of international financial institutions like IMF, World Bank, International Development Agency and so on. These are non-negotiable and non-interest bearing securities. The Government of India is liable to pay the amount at the call of these institutions. Accordingly, it is a short-term debt upon the Government of India.
5. Special securities issued by RBI
The government obtains temporary loans for a period of maximum 12 months from RBI and issues special securities, which are non-negotiable and non-interest bearing. Such securities provide short term funds to the Government.
6. Ways and Mean Advances
The Government of India obtains ways and means advances from the Reserve Bank of India to meet its short period expenditure. These debts are purely temporary in nature and are usually repaid within three months.
7. Securities against small savings
Since 1999-2000, under the new accounting system, national small savings have been converted into the Central Government securities. As a result there has been a sharp increase in internal debt and corresponding decline in small savings.
External Debt
External debt refers to the liabilities of the Indian Government, public sector, private sector and financial institutions to overseas parties.The government of India has raised foreign loans from U.S.A, U.K, France, U.S.S.R, Japan, etc.
External Debt rose from Rs. 31,525 crores in 1990-91 to Rs. 68,392 crores in 2005-06.
The external debt can be broadly divided into two groups :
A. Long term debt :
- Multilateral borrowings,
- Bilateral borrowings
- Loans from IMF, World Bank, etc.
It is to be noted that the overall external debt of India comprises of Government debt and Non-government debt. The Government debt is owed by Govemment authorities, both Central and State Governments, whereas the non-Government debt is owed by private parties in India. In terms of composition, India's external debt has shifted in favour of private debt over the last decade.
Other Internal Liabilities
The government does not include liabilities under Public Debt.
However, the government is liable to make repayment of these
liabilities. 1. Small Savings
In recent years small savings have increased due to rising money income in the economy.
Recently the Government of India launched a number of small savings instruments. These include 9% Relief Bonds 1987, Kisan Vikas Patras, Indira Vikas Patras, etc.
2. Provident Funds
Provident funds are divided into two categories :-
- Employee Provident Funds meant for employees.
- Public Provident Funds meant for general public.
3. Other accounts
Other accounts include Postal Insurance and Life Annuity Fund, Borrowings against Compulsory Deposits, Income Tax Annuity Deposit, Special Deposit of Non-Government Provident Fund and Outstanding Amount.4. Reserve Funds and Deposits
Reserve Funds and Deposits are divided into two categories :-
- Interest bearings and
- Non-interest bearings.
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