ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Need to Rationalise Rising Interest Burden on Central Government Public Debt

Interest payments are a significant component of expenditure of the central government. A substantial amount, nearly one-fifth to one-third of tax collection of the Government of India, is accounted for by interest payments. In 2014–15, interest payments were 3.3% of the gross domestic product. In 2015–16, net interest payments (difference between the interest payments and interest receipts) pre-empted over 34% of the revenue receipts. High interest payments can shelf other developmental activities due to non-availability of funds. It is, therefore, imperative to examine measures to reduce interest payments. This paper explores two approaches to reduce interest expenditure incurred by the central government inflation indexed bonds and restructuring of existing debt.

Ageing in India

India has low pension coverage, and the pension system is unable to fulfil its purpose. A non-contributory, basic pension can guarantee a regular income in old age to all residents of the country, regardless of earning or occupation. The feasibility of introducing such a pension in India is explored in this paper. It is argued that a properly crafted universal pension scheme will increase the coverage of pension without putting stress on the fisc.

Debt Management in India

A discussion of the long-standing proposal to establish a Public Debt Management Agency that would be independent of the central bank. There is need for a separation but there must be greater clarity than at present on the independence the agency will enjoy from the central government.

Should India Use Foreign Exchange Reserves to Finance Infrastructure?

India's foreign exchange reserves increased during the 1990s as a result of measures introduced to liberalise capital inflows under the financial sector reforms undertaken since 1991. The Reserve Bank of India, in consultation with the government, currently manages foreign exchange reserves. As the objectives of reserve management are liquidity and safety, attention is paid to the currency composition and duration of investment so that a significant proportion can be converted into cash at short notice. The government of India intended to use a part of its foreign exchange reserves to finance infrastructure. Infrastructure projects in India yield low or negative returns due to difficulties - political and economic - especially in adjusting the tariff structure, introducing labour reforms and upgrading technology. There is no evidence that any other country has used foreign exchange reserves to finance infrastructure. The amount of foreign exchange reserves in India is modest when compared to some of the other countries in the region and it can be argued that the proposed plan may lead to more economic difficulties than anticipated benefits.

Domestic De Debt bt and Economic Gr Growth wth in India

The study investigates the relationship between domestic debt and economic growth. The traditional view considers that in the long run, domestic debt has a negative impact on economic growth while the Ricardian equivalence hypothesis implies the neutrality of domestic debt to growth. In India, domestic debt has been incurred mainly on the coinsideration that it shall be used for investment purposes. The issue is empirically examined using the cointegration test and the Granger causality test for India over the period 1959-95. Cointegration and the Granger causality tests support the Ricardian equivalence hypothesis between domestic debt and growth.
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