Question

Get data on government debt of any country of your choice and explain its fluctuations. Also, explain who bears the burden of government debt and why. Under what circumstances is there no burden to be borne of government debt.

Answer 1

Source: https://tradingeconomics.com/india/government-debt-to-gdp

The above graph shows the debt of the Indian Government from the year 2010 till 2019. The fluctuation in debt can be clearly observed. At times it is lesser than the previous year or vice versa. There are plenty of reasons behind it but some are like:

• Dollar-Rupee exchange rate fluctuation
• Impact of economic conditions like slowdown or boom
• Trade deficit moderation
• Cost of borrowing

In India, RBI is the investment bank of government that deals with capital raising and repayment. But the burden is over Government (Central or State respectively) and managed by RBI as it is the government's bank.

If the government has sufficient inward cash flows i.e. from taxes where it can meet all it's expenses whch will lead to zero defcit. Under this condition there won't be any requirment of raising external capital.