A Study of External Debt Trap Threat Faced by Indian Economy

Abstract

A debt trap occur to a country when somebody takes debt on a high-interest rate acceptance and is barely able to disburse back the responsibility of interest, thus being continuously trap in debt even by refinancing. Public debt is often a country’s major accountability: This is principally factual in developing countries, where a substantial sum of national income is exhausted repay such debt obligation. High debt servicing has thrown developing countries into a "debt trap", depriving them of the resources needed to secure long-term economic development and build up strong social and physical infrastructures. In current decades, unsustainable debt – mostly external – has brought country after country into deep economic crisis, with dramatic social consequences for their populations. This is a concealed virus eating India's Budget and it is quite untreatable. It is called a "debt trap" and its reason is simple — greed. India's problem is that it spends much more than it earns. That is all the term "fiscal deficit" means. The focus of paper in this study is to investigate the impact of debt on Indian economy and how government fills the gap between its earnings and spending through relentless borrowing.