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Budget FAQ: What is the government borrowing?

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Budget FAQ: What is the government borrowing?

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The Union Budget is the most important executive document issued annually by the Government of India. The budget establishes the state of the government’s finances and also provides information on the areas it will focus on.

But it also shows the health of the public treasury, exactly how much the government is bringing in to its spending. Public borrowing is one of the principal means by which the government meets its expenses.

Most modern day nations choose to go into debt for various reasons like economic stimulation and stabilization, acceleration of capital spending, etc. Since the national economy often grows faster than the interest on the debt, most governments do not increase their debt. when borrowing money.

The government borrows money in the form of debt. The government issues government securities called G-secs and treasury bills. Investors, financial institutions, corporations and even other governments in some cases can buy these securities. This initial purchase gives the government the money it seeks to borrow.

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But like any other debt, the government is also responsible for paying public debt with interest. The government promises to pay the initial principal plus interest when the security matures, although some securities also offer periodic coupon or interest payments.

Just like other securities, rating agencies also rate these government debt instruments.

These payments often form a large part of the government’s budget deficit – the gap between government expenditure and revenue over the course of a year. This information is found under capital revenue in the budget document.

Governments attempt to bring their budget deficits under control by consolidating their past debts, which themselves are often referenced in terms of a percentage of national GDP to understand its true extent.

Budget FAQ: What is the government borrowing?

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