What is the Concept of Public Debt?

By Aarna Tiwari|Updated : November 8th, 2022

According to the Public Debt Concept, Public Debt is the total amount borrowed by a country's government. The total liabilities of the Union government that must be paid from the Consolidated Fund of India are included in public debt. It is the total amount borrowed by the government to meet its development budget, including total liabilities.

Public Debt Concept

Public debt is the amount of money that a government owes to outside debtors. It is the amount borrowed by the government of a country. The central government broadly classifies its liabilities into two categories such as debt contracted against the Consolidated Fund of India and public account.

  • Public debt sources are dated government securities (G-Secs), treasury bills, external assistance, and short-term borrowings.
  • The total amount borrowed by the government to meet its development budget, including total liabilities, is referred to as public debt.
  • It must be paid from India's Consolidated Fund. The term is also used to refer to the total liabilities of the central and state governments, but the Union government clearly differentiates its debt liabilities from those of the states.
  • The central government divides its liabilities into two categories: debt owed to the Consolidated Fund of India and public accounts.
  • The Union government has followed a deliberate strategy over the years to reduce its reliance on foreign loans in its overall loan mix.
  • Internal debt accounts for more than 93% of total public debt. Internal loans, which account for the majority of public debt, are further classified as marketable and non-marketable debt.

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FAQs on Concept of Public Debt

  • The Concept of Public Debt is an important measure of bridging the financing gaps of the government. The purpose of public debt is that it helps the government to accomplish its social and developmental goals.

  • Public debt sources are dated government securities (G-Secs), treasury bills, external assistance, and short-term borrowings. According to the Reserve Bank of India Act, 1934, the RBI is both the government's banker and public debt manager.

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