Greece and certain other countries of Europe recently faced a public debt crisis. The government’s debt had increased to such an extent it's unable to repay. Other countries of the European Union happen to be able to stave off the crisis for the time being. But the problem of sovereign debt persists in several countries, including Greece. In 1950-51, India’s public debt was only Rs. 2054 crore. It is expected to reach Rs. 2,898,799 crore by 2010-11. If we add post office savings and Provident Fund, the entire liability of the Centre will reach Rs 3,944,598 crore. The most worrying aspect is it is increasing by Rs. 3 to 4 lakh crore per annum. In terms of the 2010-11 budget, the government will borrow approximately Rs 2.5 lakh crore simply to pay interest on the loans previously taken. This pressure of debt compels the federal government to enhance taxation and thereby increase intervention in the economy. As per the economical principles, the governmental intervention should be minimal in order to avoid distortions. The federal government they resort to additional taxation to overcome additional borrowing. It borrows in the Reserve Bank, which in turn prints more currency notes to satisfy the government’s demand. In the recent past, this action of the government, has triggered inflation almost to uncontrollable rates. Which is the common man who has to deal with the brunt. The increase in government debt has taken the world to the brink. The intensity of the problem could be gauged by its ratio to GDP or through the rate of development of public debt. In its study of the crisis, The Economist features a ‘clock’??on its website. It implies that public debts are rising every second. By 2011, the world’s total government debt is anticipated to reach $ 42.5 trillion. The world’s total GDP is $ 58 trillion. Government debt is much higher in rich countries. Despite higher GDP,Air Max 24 7, the ratio of public debt to GDP is 63 per cent in the united states, 80 per cent in the united kingdom, 82 percent in France, 77 percent in Germany and 82 per cent in Canada. To satisfy the growing public expectation over populist measures, public spending is multiplying even just in developing countries. And due to their inability to raise sufficient revenues, public debt is also increasing. In countries where it was 53 per cent of the GDP, it has now increased to 56 percent. The major issue of concern is that public debt is growing in the rate of 15 per cent per annum; ten years ago, it was increasing by only 6 percent. In India, the increasing government debt can have several repercussions around the economy. One major impact is the fact that because of repayment obligations, the federal government is constrained to spend less on important social sectors for example health, child and women’s welfare. The Union Budget allocates Rs 2.5 lakh crore for interest repayment. Obviously with a budget size of nearly Rs 11 lakh crore, the variety of government expenditure are extremely limited, more so once the fiscal deficit reaches about Rs 4 lakh crore. Within the last many years spending on social sectors continues to be limited to only 8 to 9 percent of the budget. Health and education are the worst victims. Due to inadequate expenditure on education, the government sector institutions could not expand consistent with the needs of the population. This has facilitated the expansion of private educational institutions. Private schools, private medical and engineering collegesand private educational facilities, and the increasing quantity of managementinstitutes charge exorbitant fees. Poor people are the worst sufferers. They are deprived of education, and also the growth and development of recruiting suffers a setback. Public health is another victim of insufficient public expenditure. Once again it is the poor who're the worst sufferers. The facilities in government hospitals are decrepit. Hence the boom in nursing homes and nursing facilities. The poor can sell business assets to pay for the cost of treatment in private hospitals. The Prime Minister has said that farmers in Vidarbha often commit suicide once they encounter debt to get their family members treated. In addition to the social sector, the expenditure on roads, power, ports, and h2o can also be impacted by the rise in government debt. Due to the wasteful expenditure by the past and present regimes, the future generations will be compelled to manage the exploitation of non-public corporations in the infrastructural sector. To keep in check the growing public debt, it is important to keep wasteful government expenditure and populist spending in check. Some years ago, the government enacted the FRBM Act and placed a limit around the fiscal deficit under 2.5 per cent from the GDP. But the government has itself reneged on its own commitment and it has reconciled itself to a fiscal deficit of 5.5 percent of the GDP in the 2010-11 budget. In 2009-10, it was even higher ~ at 6.7 per cent of the GDP. The FRBM Act should seriously be enforced. The fiscal deficit should not be permitted to exceed 2.5 percent from the GDP. In case it's marginally higher, it should help facilitate higher expenditure on education, health insurance and other social sectors, and on infrastructure or agricultural development.
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