I read that India's 24% of the revenue comes from borrowings & liabilities. We have a $424...


I read that India's 24% of the revenue comes from borrowings & liabilities. We have a $424 billion debt. How is India trying to reduce debt, or is it good to keep some debt?


Concerning economics, the amount of money which is to be repaid by the borrower to the lender is called debt. Debt is paid with some percentage of interest on the principal amount.

Answer and Explanation:

Public debt comprises external as well as internal debt. According to the recent report of India's Finance Ministry, the total outstanding liabilities of India are 88.18 lakh crore at end-June 2019.

There is nothing wrong with maintaining some amount of debt, but it should not cross the fiscal limits. To maintain the fiscal deficit at 3% of the Gross Domestic Product, it is necessary to maintain the Debt-to-GDP ratio. India has been able to reduce its fiscal deficit from 4.1% of GDP in 2014 to 3.4% of GDP in 2018.

India can only reduce its debt by adopting trade-friendly policies in order to earn more revenue from the trade. India is trying to increase its exports by focusing on programs such as 'Make in India', which gives more emphasizes on the manufacturing sector and exports.

India has also initiated projects such as 'Sagarmala' to connect the coastal zones in order to boost the industrialization and exports of the country. The increased exports will bring more revenue for the country and thus less dependence on the debt.

Learn more about this topic:

Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

Chapter 8 / Lesson 7

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