B.A-II PAPER-B P.G DEPARTMENT OF PUBLIC ADMINISTRATION P.G. GOVT. COLLEGE FOR GIRLS SECTOR-11, CHANDIGARH PUBLIC DEBT AND PUBLIC EXPENDITURE

PUBLIC DEBT ---Debt incurred by the government in mobilising savings of the people in the form of loans, which are to be repaid at a future date with interest ---Borrowing involves a withdrawal made in return for the government’s promise to repay at a future date and to pay interest at the interim

Causes of Public Borrowing Sharp increase in government outlays in public sector projects Lending of significant amounts of capital funds to private sector for investment in planned development projects by the government Meeting temporary and long-term deficits Meeting unforeseen emergencies like war, economic crisis

Causes of Public Borrowing Increase in prices of goods/services Enlargement of administrative services Increasing expenditure on defence Increase in wages and allowances of government employees

TYPES OF PUBLIC DEBT Reproductive Debt -Fully covered/balanced by possession of assets of equal value --Used for creation of such capital assets which yield revenue to the Government Unproductive Debt (also called ‘dead-weight debt’) -To cover any budgetary deficits/purposes which do not yield any income to the Government --No asset created, no rule regarding period of repayment

TYPES OF PUBLIC DEBT Voluntary Debt -People are free to subscribe to Government’s securities whenever they are floated --People can invest as per circumstances/inclination Compulsory Debt -Usually in emergencies --Government enforces borrowing through legal compulsion

TYPES OF PUBLIC DEBT Internal Debt -Subscribed by persons/institutions inside the country --Transfer of wealth within the borrowing community External debt -Transfer of wealth from lending to borrowing community, when the loan is raised --Transfer in reverse direction, when interest is paid/principal is repaid

TYPES OF PUBLIC DEBT Long-term Debt (Funded debt) -Repayable after a year Short-term Debt (Floating/unfunded debt) -Repayable within a year

MANAGEMENT OF PUBLIC DEBT Methods adopted for retirement of public debt: Refunding Conversion Surplus Budget Sinking Funds Terminable Annuities Capital Levy Surplus Balance of Payments

PUBLIC EXPENDITURE (P.E) P.E=public moneys earmarked for/utilized by public offices P.E=government expenditure on itself/society/economy as a whole

Sources of revenue Taxes---income, wealth, corporates etc. Borrowing---from citizens, world money-market trading Profitable Trade---rent, selling electricity, airline tickets Donations---from citizens Lotteries---prizes, general purposes, specific projects Expropriation---raising revenue from outside national borders Fines---road-traffic offences, licensing-law offences

Factors influencing Public Expenditure Traditional functions of the state Increasing awareness of government responsibilities Public demand for government action Government investment activities Increasing population Growth of cities/urbanisation Debt servicing and repayment of loans Demands of vested interest groups High-level corruption in governmental activities

Complaints regarding P.E from general public Ineffective public expenditure patterns Weak budget-preparation and monitoring processes Inefficient financial planning processes Excessive corruption Lack of transparency in management of public expenditure