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 |
