Public Debt

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Public debt refers to the loans raised by a government within or outside the country. It occurs when government expenditure exceeds its revenue. Example: When the Indian government borrows money to bu…

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Findlay Shirras defines public debt as 'National debt is a debt which a state owes to its own subjects or to the nationals of other countries.'…

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Unlike taxes and fees, public debt must be repaid with interest. The government has to pay back both the principal amount and interest to lenders, whereas taxes and fees are not repaid to citizens.

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Government can force people or institutions to lend funds to it (compulsory loans), but no private individual can force another private individual to lend money. The government has sovereign power to …

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Under abnormal circumstances, the government can repudiate (refuse) payment of loans. However, private individuals cannot refuse repayment without facing legal action. Government has sovereign immunit…

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Governments have high creditworthiness and people have faith in government's ability to repay. Private borrowers face higher risk perception from lenders, hence pay higher interest rates. Government c…

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Internal debt is raised by the government from individuals and institutions within the country. Example: When RBI issues government bonds to Indian citizens and banks, or when Indians buy government s…

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External debt is borrowed from foreign sources including: international institutions like IMF and World Bank, foreign commercial banks, and governments of other countries. Used for development and mee…