Define public debt and give its components with reference to Indian government? Explain trends in public…

Question

Define public debt and give its components with reference to Indian government? Explain trends in public debt since 2010 onwards.

Ghissu Editorial · Accepted Answer

Public debt is government borrowing to cover spending beyond revenue, comprising internal debt (dated securities, treasury bills) and external debt from multilateral and bilateral lenders. Since 2010 it has grown, mostly internal, with maturity lengthening from 9.7 to 11.7 years, while Andhra Pradesh's liabilities reached 43.99% of GSDP in 2023.

**Introduction**

Public debt finances government expenditure beyond revenue, essential for development and fiscal stability. Since 2010, India’s public debt has grown, reflecting evolving fiscal strategies and challenges.

**Structure and Trends**

SKETCH: mindmap | Components of Indian Public Debt
- Internal Debt
- External Debt
- Debt Management⟦1⟧ Institutions

1. **Components and Instruments**: Public debt comprises internal debt (market loans, treasury bills, dated securities) and external debt (foreign loans from IMF, World Bank). ==Andhra Pradesh⟦4⟧⟦3⟧⟦2⟧==’s external borrowings with sovereign guarantees show institutional evolution.

2. **Debt Management Role**: RBI manages issuance and servicing but faces conflicts due to its monetary policy role; proposals for an independent debt management office aim to enhance efficiency.

3. **Fiscal Deficit⟦5⟧ and Borrowing Trends**: Union Budget⟦6⟧ 2026⟦7⟧-27 forecasts a 4.3% GDP fiscal deficit, with gross market borrowings at ₹14.61 lakh crore; internal debt share and maturity profiles have increased to mitigate rollover risks.

4. **State-Level Debt Challenges**: ==Andhra Pradesh==’s liabilities reached 43.99% of GSDP in 2023, with revenue deficits quadrupling in 2022-23 and capital expenditure falling sharply, straining fiscal health.

**Implementation and Outcomes**

5. **Fiscal Discipline Issues**: States like ==Andhra Pradesh== struggle with widening revenue deficits and governance lapses, as audits reveal ₹968 crore excess payments and 48% public account share, undermining debt sustainability.

6. **Market Participation**: Commercial banks dominate government securities holdings; foreign investor participation remains limited, affecting market depth.

**Way Forward**

7. **Reforms Needed**: Establishing an independent debt management office and strengthening fiscal discipline, especially in states, are critical for sustainable debt management.

**Conclusion**

Balancing growth financing with debt sustainability requires institutional reforms and improved governance to secure India’s fiscal future.

Define public debt and give its components with reference to Indian government? Explain trends in public debt since 2010 onwards.

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