21.Public Debt

Question 1

What is public debt?

Answer 1

Public debt is the total amount borrowed by the government, including liabilities, to meet its development budget.

Question 2

Where does public debt have to be paid from?

Answer 2

Public debt has to be paid from the Consolidated Fund of India.

Question 3

How is the term “public debt” used in relation to government liabilities?

Answer 3

The term “public debt” is used to refer to the overall liabilities of central and state governments, although the union government distinguishes its debt liabilities from the states.

Question 4

What does “government debt” refer to?

Answer 4

“Government debt” refers to the debt of the Central Government.

Question 5

What does “general government debt” mean?

Answer 5

“General government debt” refers to the debt of the Central Government and state governments.

Question 6

Can state governments in India borrow for the short term?

Answer 6

No, state governments in India can only borrow for the long term by issuing securities or bonds.

Question 7

What is the subject of Article 293?

Answer 7

The subject of Article 293 is borrowing by states in India.

Question 8

What does the executive power of a state extend to regarding borrowing?

Answer 8

The executive power of a state extends to borrowing within the territory of India upon the security of the Consolidated Fund of the State, within limits set by the state legislature.

Question 9

What authority does the Government of India have in relation to loans and guarantees for states?

Answer 9

The Government of India can make loans to any state and give guarantees for loans raised by any state, subject to conditions laid down by Parliament.

Question 10

Where are the sums required for making loans by the Government of India charged?

Answer 10

The sums required for making loans by the Government of India are charged on the Consolidated Fund of India.

Question 11

Can a state raise a loan without the consent of the Government of India?

Answer 11

No, a state cannot raise a loan without the consent of the Government of India if there is still outstanding any previous loan or guarantee from the Government of India or its predecessor.

Question 12

Can the consent of the Government of India be granted without any conditions?

Answer 12

No, the consent of the Government of India can be granted subject to conditions that the Government of India deems fit to impose.

Question 13

What are Treasury Bills?

Answer 13

Treasury bills are money market instruments issued by the Government of India as a promissory note with guaranteed repayment at a later date.

Question 14

What is the typical purpose of funds collected through Treasury Bills?

Answer 14

The funds collected through Treasury Bills are typically used to meet the short-term requirements of the government.

Question 15

How would you describe the tenure of Treasury Bills?

Answer 15

Treasury Bills are primarily short-term borrowing tools with a maximum tenure of 364 days.

Question 16

What is the interest rate associated with Treasury Bills?

Answer 16

Treasury Bills are available at a zero coupon (interest) rate.

Question 17

How are Treasury Bills issued in relation to the nominal value of government securities?

Answer 17

Treasury Bills are issued at a discount compared to the published nominal value of government securities (G-sec).

Question 18

What is external debt?

Answer 18

External debt refers to the portion of a country’s debt that is borrowed from foreign lenders.

Question 19

What does internal debt refer to?

Answer 19

Internal debt refers to the portion of a country’s debt that is incurred within its borders.

Question 20

What is the majority of debt in India?

Answer 20

The majority of debt in India is internal, with only a small amount of debt being external.

Question 21

Can you provide an example of the proportion of external debt in India?

Answer 21

Yes, for example, only 6% of the debt in India comes from external sources, while the remaining debt comes from internal sources.

Question 22

What recommendation did the NK Singh Committee make regarding debt and fiscal policy?

Answer 22

The NK Singh Committee recommended using debt as the primary target for fiscal policy.

Question 23

What Debt to GDP ratio should be targeted according to the NK Singh Committee?

Answer 23

The NK Singh Committee recommended targeting a Debt to GDP ratio of 60%, with a 40% limit for the center and a 20% limit for the states by 31 March 2026.

Question 24

What is the purpose of Article 266?

Answer 24

Article 266 deals with the Consolidated Funds and Public Accounts of India and the States.

Question 25

What does the Consolidated Fund of India consist of?

Answer 25

The Consolidated Fund of India consists of all revenues received by the Government of India, loans raised by the government through treasury bills, loans, or ways and means advances, and money received in loan repayment.

Question 26

What does the Consolidated Fund of a State consist of?

Answer 26

The Consolidated Fund of a State consists of all revenues received by the Government of a State, loans raised by the government through treasury bills, loans, or ways and means advances, and money received in loan repayment.

Question 27

What happens to other public money received by the government?

Answer 27

Other public money received by the government is credited to the public account of India or the public account of the State, depending on the case.

Question 28

What is the condition for appropriating money from the Consolidated Fund of India or a State?

Answer 28

Money from the Consolidated Fund of India or a State can only be appropriated in accordance with the law and for the purposes and in the manner provided in the Constitution.

Question 29

How can the government mobilize government securities?

Answer 29

The government can mobilize government securities through marketable securities and non-marketable securities.

Question 30

Who is responsible for overseeing the public borrowing of the Central Government and state governments?

Answer 30

The Reserve Bank of India is responsible for overseeing the public borrowing of the Central Government and state governments.