Advanced Search
MyIDEAS: Login

Budget Deficit and National Debt: Sharing India Experience

Contents:

Author Info

  • Kanhaiya Singh

Abstract

India suffered humiliations in terms of balance of payments crises in 1991 but since then it has weathered all crises, which have hit the world economies despite the fact that subsequent periods have seen even larger current account and fiscal deficits. It is in this context that an analysis of fiscal and debt problems of India is timely and assumes importance. The paper delves upon fiscal exuberance and debt management practices in India, the budgetary allocations, changing structure of the deficit and debt, and the sustainability. The external and internal balances highlight its dependence on external borrowing and the vulnerability of the economy and the important role played by the foreign exchange accumulation in avoiding crises. India's deficit and debt dynamics is characterised as adverse on following grounds: (1) while deficit is increasing, the share of capital formation out of budget is decreasing. Therefore, income multiplier to government expenditure may not be enough to cover the debt liability in long run. (2) Government debt dynamics is unstable with large variability and therefore, it lacks credible predictability of future path. (3) Exposure of the economy to non‐government external debt is increasing and therefore, there is a case to conduct analysis about the economic returns to such borrowings in terms of long term sustainability. More flows in capital account is sought for than that required by current account, which is essential to meet its fiscal deficits. There are indications that acceleration in fiscal deficit causes current account deficit, which would make the debt dynamics more unstable. With debt to GDP ratio being very high and unstable, India faces potential risk of sovereign default. Increasing globalization has increased the external vulnerability as short term component of total external debt is sharply increasing. The external debt being driven by the private sector, the corporate governance issues have become more critical. The relevance of high foreign exchange reserves has increased further for sustaining growth and avoiding crises situations.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://crawford.anu.edu.au/acde/asarc/pdf/papers/2013/WP2013_08.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The Australian National University, Australia South Asia Research Centre in its series ASARC Working Papers with number 2013-08.

as in new window
Length: 38
Date of creation: 2013
Date of revision:
Handle: RePEc:pas:asarcc:2013-08

Contact details of provider:
Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 0200
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Email:
Web page: https://crawford.anu.edu.au/acde/asarc/
More information through EDIRC

Related research

Keywords: India; Budget Deficit; Debt Sustainability; Internal and External Balance;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pas:asarcc:2013-08. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.