Public debt in India has increased over 7 times from 1990-1991 to 2005-2006. It includes money borrowed by the government through internal loans within India and external loans from international organizations. There are several types of public debt like short-term, long-term, productive and unproductive debts. While public debt allows the government to fund development projects, it also burdens citizens with increased taxes and can adversely affect growth. Proper management of public debt is needed in India through reducing expenditures, encouraging foreign investment, and monitoring public spending.

1. PUBLIC DEBT IN INDIA

2. WHAT DO YOU MEAN BY PUBLIC DEBT?Local, state and federal governments all borrow money to pay for large projects, such as new government buildings, schools or for funding etc. This forms what is collectively known as the public debt, so- called because it is money that public organizations owe for which the burden of paying rests ultimately with taxpayers. This debt can take the form of many types of loans to the government.Public debt may be raised internally or externally.

3. TYPES OF PUBLIC DEBTGovernment loans are of different kinds, they may differ in respect of time of repayment, the purpose, conditions of repayment, method of covering liability etc.Thekinds are: Productive and Unproductive debts The debts which are productive for the economy are known as productive, similarly the debts which do not benefit the economy are unproductive.Voluntary and Compulsory Debt Generally the debts taken are voluntary, on the part of the government, known as voluntary debts whereas in times of wars or crisis there is a mandatory loan taken by the government known as compulsory debt. It is a rare phenomenon.Internal and External Debt Internal debt refers to public debt floated within the country; While external debt refers loans floated outside the country.

4. Short-Term, Medium-Term & Long-Term Debts The debts maybe for short, medium or long periods.Redeemable and Irredeemable Debts The debts which the government promises to pay at a future date are known as redeemable and Irredeemable is vice-versa. It does not have a maturity period.Funded and Unfunded Debts The funded debts are those which are paid after a long period of time with a fixed rate of interest. Unfunded debts are incurred to meet the temporary needs of the government. They are of a comparatively short period say a year.

5. STATUS OF PUBLIC DEBT IN INDIADuring 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 mobilizing the resources.The following table indicates the composition of PUBLIC DEBT of the Central Government of India.

6. The Central Government of India's debt has increased by over 7 times between 1990-91 and 2005-06. Apart from internal debt, there are also internal liabilities of the Central Government in the form of small savings of the public provident funds, reserve funds and deposits of Government departments. Internal and external debt are the major components of public debt. The sub-components of internal and external debt are:INTERNAL DEBT:Market loanTreasury billsBondsSpecial securities issue by RBIWays and Mean Advances ( To meet the short term expenditure)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. )

7. EXTERNAL DEBT:Bilateral borrowingsMulti lateral borrowingsLoans from international organizations like IMF, World Bank etc.OTHER INTERNAL LIABILITIES:Small savings (Recently the Government of India launched a number of small savings instruments. These include Relief Bonds 1987, Kisan Vikas Patras, Indira Vikas Patras, etc. )Provident FundsReserve funds and depositsOther accounts (Postal Insurance and Life Annuity Fund etc.)

8. TREND OF PUBLIC DEBT2005-10 (in % 0f GDP)In 2011, India stands on the 44th position in the world, having 55.9% of GDP as public debt. Japan has the maximum public debt at 225.8% of GDP.

9. Puts burden on the citizens of the countryLeads to increase in taxAdversely affects the growth and development of IndiaResults into India borrowing more from International Org. like World Bank.Productive use of the funds is not guaranteed.DEMERITS OF PUBLIC DEBT

10. HOW TO MANAGE PUBLIC DEBT?REDUCTION IN PRIMARY DEFICIT Attempts must be made to contain most revenue expenditures within the revenues raised by the Government so that Government's net borrowing is used only for productive purposes. REDUCTION IN CURRENT EXPENDITURE That means, reduction in gov., expenditure for its staff, reduction in subsidies etc.FOREIGN INVESTORS Encouragement of foreign investment should be done.MORE DISINVESTMENT The government should hand over the sick units to the private sector for development.PROPER MONITORING OF PUBLIC EXPENDITURE If the expenditure is less and efficient the need for debt automatically decreases.CONSOLIDATED SINKING FUND (CSF) There is an urgent need for creating CSF to break the vicious cycle of burden of debt and repayment.

11. The main reason for increase in internal public debt in India during 1961-2004 was the requirement of funds for financing various developmental programmes as both tax and non-tax revenues were totally inadequate to finance the government expenditure.The external public debt in India increased significantly during 1961-2004 as it was utilized to make import payments and solve balance of payment problems.The tremendous rise in total public debt in India during 1991-2004 provides an alarming signal to Indian economy. There is an urgent need to manage public debt in India.However we cannot ignore the fact that public debt is essential for the functioning of the government and the economy. But there is also a point we need to think upon that is, “Government debt (Public debt) is increased future taxation”CONCLUSION

12. BIBLIOGRAPHYThanks to :www.ehow.comwww.indexmundi.comwww.kalyan.city.blogspot.comwww.wikipedia.comwww.reuters.com BY HEER KHANT