Public Debt Economic Growth Nexus: How Effective to Allay Resetting Economic Growth of India

Abstract

There are two primary schools of thought in contemporary debates on the causes of India's debt crisis: those linked to changes in the world economy and those connected to errors in domestic policy. Because of the instability of the world economy, developing countries like India are forced to borrow money from national and international institutions to make up the difference in their spending. For these capital-poor economies to improve their capital stock and stable levels of per capita output, borrowing is considered essential. According to conventional economic theory, public debt can temporarily increase economic development by promoting aggregate demand. Nonetheless, the majority of empirical research conducted in many nations shows that public debt and long-term economic growth are negatively correlated. Theoretically, it is still unclear how much public debt has contributed to India's economic expansion. The purpose of this study was to investigate how public debt affected India's economic growth from 1991 and 2022. The study looked at the connection between India's economic expansion and public debt. The report suggests that borrowed money be used to diversify the productive capacities of the economy and advises cautious management of governmental debts. This would produce sufficient resources to settle the obligations without having a negative impact on the economy.