![]() and unclaimed balance in respect of three-year Interest-free Prize Bonds. (4) Other miscellaneous obligations of the Central Government constituting the internal public debt in India are: Compulsory Deposit Scheme, Gold Bonds, Public Provident Funds, and items of unfunded debts and special securities issued to the United States Embassy for the Rupee Counterpart funds since 1961, unclaimed balance of State Provident Funds, and other accounts such as General Family Pension Fund, the Hindu Family Annuity Fund, the Postal Insurance, Life Insurance, Life Annuity Fund, etc. (3) Small Savings - a non-inflationary means of finance - effectuated/tapped through instruments such as Post Office Savings Bank Deposits, Cumulative Time Deposits, Post Office Recurring Deposits, National Defence Certificates, 15-year Annuity Certificates, National Savings Certificates, National Savings Annuity Scheme, National Development Banks, National Savings Account, Indira Vikas Patra, Kisan Vikas Patra. However, when a foreign loan is repaid or interest is paid on such loans, there would be a transfer of resources from the debtor to the creditor countries, causing a decline in total resources of the debtor country. When the loan is made through the means of external loans the resources available to the borrowing nation increase. It amounts to only a redistribution of income in the community from one section to the other.Įxternal debt, on the other hand, leads to a transfer of wealth from the lender nation to the borrower nation. It has, therefore, no direct net money burden as such. ![]() ![]() An internally- held public debt, thus, represents only a commitment to effect a certain transfer of purchasing power among the people within the country. Similarly, payment of interest for repayment of principal of internal loans would transfer resources from tax-payers to bond-holders. Simply the resources are transferred from the bond-holders - individuals and institutions - to the public treasury, and the government can spend, these for public purposes. Since under internal debts, borrowing takes place within the country, the availability of total resources does not arise. Only in the case of a colony, an external loan can be raised by compulsion. An internal loan may be voluntary or compulsory, but an external loan is normally voluntary in nature. The following points of distinction between internal and external debts are noteworthy:Ī. It enables the country to consume more than it produces. External debt represents a claim of foreigners against the real income (GNP) of the country, when it borrows from other countries and has to repay at the time of maturity.Įxternal public debt permits import of real resources. Public borrowings from other countries are referred as external debt. Public loans floated within the country are called internal debt. Funded and Unfunded Debt.įor brevity, the types of public debt are restated in Chart 1. Short-term, Medium-term and Long-term loans 6.
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