Meaning of Public Debt:

Public debt refers to the total amount of money owed by the government to creditors, both domestic and foreign. It is the accumulation of past borrowing by the government through issuing bonds, bills, and other securities to finance its expenditures when its revenue falls short of its spending. Governments often borrow money to finance infrastructure projects, social programs, defense, and other public services. The causes for increasing public debt are many in number.

Public debt can be incurred at various levels of government, including national, state, and local levels. It is typically considered a long-term liability and is an integral part of fiscal policy. Public debt can be contrasted with other forms of government debt, such as intragovernmental debt (money owed by one part of the government to another) and private debt (owed by individuals and businesses).

Due to increase in the activities of the Government, the volume of the public sector expenditure has rise and over the years every time it is not possible to meet the increase expenditure through the traditional source of revenue namely taxes. Beside increase in taxes are unpopular within the general public. Thus the governments obtain additional revenue through borrowings.  In present Times borrowings by the government has become a routine method of financing along with the other source of rising revenue. Public debt or government debt is the debt which the government owes to individual, business enterprise or banks. it can borrow from within or from outside the country.  

Causes for Increasing Public Debt:

1. Government Budget Deficits: When government spending exceeds government revenue (taxes, fees, etc.), it results in a budget deficit. To cover this deficit, governments often borrow money by issuing bonds or other debt securities, thereby increasing the public debt.
2. Economic Downturns: During recessions or economic downturns, tax revenues tend to decrease as incomes decline and unemployment rises. At the same time, governments may increase spending on unemployment benefits, welfare programs, and stimulus measures to boost the economy. These fiscal responses to economic challenges can contribute to an increase in public debt.
3. Wars and Military Spending: Wars and military conflicts often require significant financial resources. Governments may borrow money to finance military operations, purchase weapons, and support troops, leading to a surge in public debt.
4. Demographic Trends: Aging populations can strain government budgets through increased spending on pensions, healthcare, and other social services. As the proportion of retirees grows relative to the working-age population, governments may need to borrow to fund these obligations, contributing to higher public debt levels.
5. Infrastructure and Capital Projects: Investments in infrastructure, such as transportation systems, utilities, and public buildings, often require substantial upfront funding. Governments may choose to borrow money to finance these projects, spreading the costs over time.
6. Tax Cuts and Revenue Reductions: Implementing tax cuts without corresponding reductions in government spending can lead to budget shortfalls, prompting governments to borrow to cover the revenue shortfall.
7. Financial Bailouts: During financial crises, governments may bail out troubled financial institutions or industries to prevent systemic collapse. These interventions can result in increased public debt if the costs are not fully recouped.
8. Interest Payments: When governments borrow money, they typically have to pay interest on the debt. If interest rates are high or if the debt level is substantial, interest payments can become a significant portion of government spending, contributing to further debt accumulation.

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