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Study on government deficits and debts in India. How do government debt-deficit sustainability issues hinder India’s growth

Abstract

Emerging nation India has high hopes of becoming a developed nation. In recent time Indian economy is considered as the fastest growing economy hence there are certain drawbacks such as the government deficits, debts which hinder India from achieving their goal. Development of nation is based on several factors and its more important for every nation to encourage changes, although metamorphic changes have been brought about in the Indian economy every now and then which has seen India emerging as one of the fastest growing countries in the world but on the other hand one of the most embarrassing disappointment during the reform period has been India’s inability to hold the fiscal deficit. Indian government deficits and public debt have remained high regardless of rapid economic growth in recent years and irregular attempts to inspire greater fiscal discipline. This paper describe possible reason for these government and other debts, further paper also focus on how these debt- deficit are major problem in India’s growth.

Table of contents

CHAPTERS

1. Introduction

1. What are debts and deficits?

2. What are government debts and deficits?

3. What is Fiscal deficit and Budget deficit?

4. Why should debt and deficit matter?

2. Objectives

1. How did countries accumulate large debts and deficits?

2. Inflation and Output Stabilisation.

3. What are Indian government debts and deficits?

4. How to reduce Government deficit?

3. Literature Review

1. Introduction

2. Economic effects of deficits

3. Government debt-deficit sustainability issues

4. Fiscal deficits and government debt in India.

5. Procyclicality of the fiscal balance in India.

6. Effects of government debts and deficit on India’s growth.

4. Methodology

5. Data Analysis & Discussions

1. Fiscal Sustainability in India.

2. Debt-deficit dynamics in India.

3. India’s Fiscal Situation in International Perspective

6. Conclusion

7. References and Bibliography

1. Introduction

In this research my main aim is to describe Indian government deficits and debts in India and how does these government debt-deficit sustainability issues hinder India’s growth. Fiscal policy (In economics, monetary policy is the use of government spending and revenue collection to influence the economy) plays and important role for countries like India.

Budget imbalances (A budget for which expenditures are more than income) are persistent in developing countries like India. Indian fiscal authorities have been no different to this rule, and there have been many occasions where India has had long budget deficits (Raju & Mukherjee, 2010). There are no doubts that the ongoing need for fiscal consolidation and the accomplishment of fiscal sustainability continues to be the key macroeconomic issue confronting India. India has a different track record to other developing countries in terms of fiscal, India’s large budget deficits have not gone hand in hand with unfavourable macro economics developments such as high inflation periods and periods when India has had negative growth in per capita income. In my report I strive to scrutinize how this debt-deficit sustainability problem is becoming a big issue for India. Along with this the report will examine the reasons and cure for the problem by understanding what these deficits followed by a complete understanding of origin of debts and their direct impact on economic growth of India

1. What are debts and deficits?

DEBTS
In simples words debts are something which are owed. It can be assets, money or it can also be a moral obligation. In this case we are referring to government debts. We can also explain debts as net accumulated borrowing by the federal government. It's the difference between all the money that the federal government of any country has ever spent and all the revenue that it has ever collected since its national inception. There are various types of debts which companies consider to finance its projects and operations. These may be secured or insecure debts, further categorised into public and private debts. A basic loan is the simplest form of debt. Some of the debts are named as following • Bank Overdraft

• Any loan
• Working Capital
• Bill Discounting
• Financing for project
• Cash credit
• Cash on Assets.

DEFICITS
Again in simple words it is the difference between money earned and money spent, here in terms of government deficits it is considered as the annual federal budget and accordingly deficit is the amount that nation’s federal government borrows each year. It's the difference between what the federal government spends and the revenue it receives during a particular year. A government's deficit can be measured with or without including the interest it pays on its debt.

2. What are government debts and deficits?

As discussed above a deficit occurs when expense is more than income. In case of government, a government deficit occurs when government has spent more than the revenue collected in particular financial year, in other words its also knows as government budget deficit. These revenues consist of the money that government collects from its public in form of income tax,...

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