DEBT MARKET

BY: PRIYANKA SHARMA PRIYANKA DEB SHARMA TANUSHREE AGARWAL KHUSBOO NAHAR RIA KUNDU

WHAT IS DEBT MARKET?
A debt is an obligation owed by one party (the debtor) to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.

TYPES OF DEBT
TYPES OF DEBT
Public Debt Internal Debt External Debt Private Debt

PUBLIC DEBT
Public debt or public borrowing is considered to be an important source of income to the government. If revenue collected through taxes & other sources is not adequate to cover government expenditure government may resort to borrowing. Such borrowings become necessary more in times of financial crises & emergencies like war, droughts, etc.

TYPES OF PUBLIC DEBT
1. Productive and Unproductive Debt 2. Voluntary and Compulsory Debt 3. Internal and External Debt 4. Short-Term, Medium-Term and Long-Term Debt 5. Redeemable and Unredeemable Debt 6. Funded and Unfunded Debt

PRIVATE DEBT

INTERNAL DEBT
• Internal debt is the part of the total debt in a country that is owed to lenders within the country. • Internal debt owed by a government is part of the country's national debt. • These may be traded but will only rarely be spent on goods and services. • The Indian government's internal debt rose during the second quarter of 2011-12 and the it had to pay higher interest to raise funds. • The internal debt to GDP ratio increased to 32.3% of GDP during Q2 of 2011-12 from 31.4%

EXTERNAL DEBT
• External loans are raised from foreign countries or international institutions. These loans are repayable in foreign currencies. External loans help to take up various developmental programmes in developing and underdeveloped countries. These loans are usually voluntary. • An external loan involves, initially a transfer of resources from foreign countries to the domestic country but when interest and principal amount are being repaid a transfer of resources takes place in the reverse direction.

EFFECTS OF INTERNAL DEBT
• Internal debt trap • More burden on poor and weaker sections • Increasing interest burden • Unjustified transfer • Indirect real burden

EFFECTS OF EXTERNAL DEBT
• External debt trap • Direct real burden • Decline in expenditure to public welfare programmes • Decline in the value of nation's currency • Burden of unproductive foreign debt • Political exploitation

EFFECTS OF DEBT CRISIS IN INDIA
• Europe and US account for a third of India's exports • The sovereign debt crisis in US is going to affect the export of goods from India and flow of capital into the country. • Foreign Exchange Reserves - India holds roughly US$41 billion worth in U.S. treasuries • Any cuts in the US governments healthcare spending will affect the pharmaceutical industry • Increase in tax will effect garment industry

HOW TO CUT DEBT?
• Reassessing the fiscal policy for successful debt reduction. • fiscal consolidations that rely also on revenueenhancing measures are more likely to accelerate debt reduction. • We label it as the ‘Rebalancing Adjustment Effect’.

METHODS TO CUT DEBT
• Raise the retirement age.  • • • • Cap discretionary spending. . Require well-off seniors to pay more of their share of Medicare.  Don't extend so many of the Bush tax cuts.  Enact an energy tax.

5 THINGS THAT CAN HAPPEN IF WE DON’T CUT DEBT
• Your life savings could be reduced to nothing almost overnight. • Your taxes will skyrocket • Your life could be in danger • Your payments from the government will dramatically decrease or stop altogether. • You will have a dramatically reduced standard of living

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