Methods of Debt Redemption - Public Debt, Public finance Video Lecture | Public Finance - B Com

after looking into the various reasons
for the public debt now let's look into
the what are the different ways for the
debt reduction debt Redemption means to
repay the debt what are the different
methods what are the different ways by
which the government repay the launch
taken by the various sources first
method is the repudiation of debt
repudiation of debt it means in this
case the government completely refuses
to pay the principal as well as the
encrust but this is quite unpopular and
unjust because if the government adopts
the repetition of debt the government
loses its popularity as well as the
people also lose their faith in the
government and the government will not
be in a position to raise loan in the
future so it's quite unpopular and
unjust and it is not adopted by the
government in any case next thing is the
refunding of debt in this case the
government raises the new bonds to pay
off the maturing bonds in this the
government does not return the old bonds
but to pay the old ones the government
raises the new bonds in the market in
this case what happens the burden is
only postponed to the future date it has
never returned the burden of the
government has never lesson in this case
it has only postponed for the future
date but the thing which comes the main
questions remained there that the
government has to return for some time
we can say that the government can feel
relaxed in the repayment of the loan to
the public but ultimately it has to pay
next thing which comes over here is the
debt conversion this is another method
in this case the government exchanges
the new debt for the old it it consists
of the converting a high interest debt
into the low interest rate in this the
government just reduces the interest
rate of the old it with the new debt but
this is only possible in one condition
if the government enjoys good
creditworthiness in the economy if the
people they have faith in the government
then only the government can go for this
method which is known as the debt
conversion next method which comes over
here is the budgetary surplus it is a
method which is used by the government
for paying off the
public debt to the people this is the
method which is also useful because in
this case the government is required to
purchase its own bond and securities
from the market but again we can say
that this is again a rare phenomena we
cannot regenerate find this type of
method adopted by the government in the
various economies next we have the
terminal entities terminal annuities is
just like the paying of the installments
paying off installments by the
government in this case what happens the
government pays that in equal
installments
which includes interest as well as the
principal amount but this is the method
which reduces the burden of the
government very slowly but it is
beneficial because it maintains the
faith of the people in the government at
least we can say that it is better than
the other methods which are adopted by
the government next you have the sinking
fund sinking fund it's also a new method
which is reliable which is adopted by
the government also in the case of
sinking fund the government establishes
or government makes a separate fund for
the purpose of repaying its debt in
simple words we can say that it's a
method which is just like a piggy bank
the government creates a piggy bank and
every month or after a regular time
duration the government keep on
depositing the amount of money and once
the time of repayment comes the
government takes out the money from that
piggy bank or from that sinking one and
replace the debt but it is very
systematic method for the debt repayment
but one negative point is also attached
with the sinking fund method that it is
a very slow method but ultimately it
reduces the burden of the government
next we have is the statutory reduction
in the rate of interest in this case the
government compulsorily reduces the rate
of interest it is compulsory for all the
people for all the institutions to adopt
the reduced rate of interest by the
government or in other words we can say
that in this case the creditors are
forced to accept reduced rate of
interest where us and the government
adopt this method during only the
financial
now over here we can have a some
similarity with the previous method also
this is the method which is quite
similar to the dit conversion because in
both the cases whether it is a sachet or
e reduction in the rate of interest on
the debt conversion in both the cases
the government reduces the rate of
interest but first one that is that
conversion that is the voluntarily
method whereas the statutory reduction
is the compulsory and people are forced
whereas in the debt conversion the
people are not forced to accept the
reduce rate of interest next we have is
the capital levy capital levy is the
method in which the government imposes
heavy tax on the property and wealth and
it is imposed on the rich individuals
only on the progressive scale now I
would like to correlate over here with
the progressive scale with the
progressive taxation as you remember in
the case of progressive taxation more
then come more is the tax same over here
more the property more the wealth of a
person more will be the tax and this is
the method which is very quick and
equitable because it is in this case the
debt is repaid according to the debt is
repaid according to the capability
according to the ability of the
taxpayers next is the adopted during war
this is the method which is generally
adopted during the time of war
it is never adopted during the normal
durations normal conditions in the
economy next we have as the export
surplus it's a very interesting thing
and it's so very mostly used method but
various economies of the world this is
the method which is known as the export
surplus in this what happens the
whatever the launch whatever the foreign
loans are raised by the government from
the various countries various
individuals as well as by the various
international organizations of the world
that foreign amount load that loan is
only invested by the government in the
industries or the manufacturing unit
which produce only the export items
because with the help with the help of
using the foreign loans in the
industries which are making the export
items those export items are again
export
to the other countries of the world and
it becomes easy for the government to
repay because in this the loan is repaid
by the government and side by side to
the economic condition of the country
also develops with the help of export
surplus the government is in a position
to provide employment as well as the
proper use of the raw materials which
are available in the country positive
effects of the public debt is kakaka far
the public debt over to KFI them are
pass on the first thing which comes over
here is the mobilizing resources of
economic development public debt helps
in mobilizing the resources for economic
development means the government with
the help of public debt or with the
amount borrowed from the various sources
the government is in a position to
utilize all the natural resources which
are lying idle in the country especially
in the direction for the development it
doesn't with the help of the public debt
the government becomes strengthened
enough or we can say that the government
becomes sufficient enough to use the
amount to borrow from the various
sources to use for the better allocation
of resources for the proper distribution
of the resources as well as for the
proper you efficient use of the
resources for the economic development
as well as for the social development
next it is used for the infrastructural
facility the power amount borrowed by
the government can also be used for the
infrastructural facilities
infrastructural facilities it can be in
the form of economic infrastructure for
the economic overhead as well as the
social infrastructure as well as the
social overhead in this the borrowed
amount of money can be utilized for the
construction of roads it can be utilized
for the construction of power projects
it can also be utilized for the
construction of schools even for the
health centers or you can say the
various marketing areas if for the
agriculture as well as for the industry
next thing which comes over here the
public debt can also be utilized by the
government for the developmental
expenditure developmental expenditure
means the government can utilize the
borrowed amount of money for the areas
or for the spheres which can help in
increasing the productive capacity of
the country
capacity of the country can only be
increased by increasing the number of
industries by increasing the
agricultural sector and by making some
new changes which can be beneficial for
increasing the production in both the
sector's it can also be used in the
construction of your railway tracks it
can also be used for the construction of
bridges next thing which comes over here
to acquire foreign exchange last but not
the least the government can also use
the public debt to acquire foreign
exchange foreign exchange means if the
suppose if the government is the need of
the foreign currency then what the
government can do the government can
borrow from within the country and with
the amount to borrowed from within the
country the government can switch over
to or borrow from other countries in the
form of loans next thing that comes over
here is the negative effects of the
public debt there are the negative
effects of the public debt also first is
the additional tax burden additional tax
burden whenever the government borrows
money from the public it is the moral as
well as moral responsibility of the
government to return the loan and this
loan can only be returned by the
government and the government alone is
not going to pay off the loans but it is
going to collect the amount only from
the people only from the people means
the amount the amount for the ripping
off or repaying the public debt can be
collected by the government only by
imposing taxes and imposing taxes are
always responsible for increasing the
tax burden on the people tax burden of
the people can be on on both the classes
of the society whether the rich class or
the poor class next is the effects on
distribution the public debt is
responsible for disturbing the
distribution of income in the economy
because in this case to repay the public
debt the government always imposes the
taxes and the taxes can be imposed by
the government either in the form of
direct taxes or indirect taxes direct
taxes are imposed only on the high class
of the society it covers the less number
of people but if the government adopts
the indirect taxes then indirect taxes
it means it is paid by all the people of
the society whether the person is rich
or poor as a result the distribution of
income gets disturbed in the economy
makes this the burden of external debt
in the case of the public debt of the
government can be internal or the
external internal debt it can be
voluntarily as well as compulsorily
whereas in the case of external it is
only a voluntarily but one thing over
here in the case of internal the
government may refuse to prepay the debt
but in the case of external the
government cannot afford to do that
because in any case the government has
to repay the external debt and they
external debt it keeps on increasing
with the passage of time and moreover in
some of the cases the burden of external
debt is such that the government has to
borrow more money from the various
sources or from the other countries of
the world which again increases the
burden on the people as well as the
government of the country next thing is
the unproductive date once the
government becomes habitual of borrowing
from the public it is the easiest way to
generate money or to produce money in
the economy as a result the government
sometimes may utilize public debt which
is weak in other words we can say that
which is the hard-earned money of the
people for utilizing it for some
unproductive purposes unproductive
purposes like sometimes the government
may use the public debt for the
manufacturing of defense equipments it
may be utilized for only for the
administration of the government
machinery which is completely
unproductive so the government must
borrow from the public as the last
resource and whatever the amount is
borrowed by the government should be
utilized our must be utilized only for
the productive purposes because whenever
the government borrows it is a liability
because the government has to return the
money to the public in any case as well
as to the external government's or the
external countries so common tasks needs
to be very careful while spending the
amount of the public debt on any of the
project now let's recapitulate whatever
the things we have learnt we have
learned in this chapter the meaning of
public debt what is
the public debt basically we have done
public debt it is related to the loans
raised by the government from within the
country and from the outside we have
learnt the different types of public
debt we have learnt that what are the
reasons what are the methods for public
debt what are the reasons for the
borrowing of public debt why the
government needs to borrow the public
debt now and in the end we have done
that what are the positive and the
negative effects of the public debt