Chapter 8 : Public Finance in India Q.3.Distinguish between the following concept 2. Internal debt and External debt.

Balbharati solutions for Economics HSC 12th Standard Maharashtra State Board.

 

Chapter 8 : Public Finance in India

Q.3.Distinguish between the following concept

2. Internal debt and External debt.

Internal debt	External debt
i) When a government borrows from its citizens, banks, central banks, financial institutions, business houses, etc. within the country, it is known as internal debt.	i) When a government borrows from foreign governments, foreign banks or institutions, international organizations like International Monetary Fund, World Bank, etc., it is known as external debt.
ii) Internal debt is raised for internal requirements like financing the developmental plans.	ii) External debt is raised mainly for overcoming the balance of payment deficits and also for developmental plans.
iii) External debt has a greater burden on the economy than internal debt.	iii) In the case of external debt, when interest payments on the debt are due, money flows from the domestic economy to foreign countries