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What are the likely consequences of public deficit?

What are the likely consequences of public deficit?

Answers

Judy
a) Accumulation of Public Debt: It encourages non-plan, non-productive and inflationary public expenditure.

b) Increase in the burden of interest payments: There is enormous rise in the cost of servicing the public debt. The whole expenditure constitutes, non-plan, non- productive and non-developmental expenditure.

c) Generation of inflationary pressure: Accumulated fiscal deficits over years have been responsible for growing non-plan expenditure and add to inflationary pressure.

d) Adverse effect on Developmental expenditure: Besides the rising defense expenditure and civil expenditure on ministries and their employment, the increased interest payments due to the past borrowings is a major cause of growing non-plan, non-developmental government expenditure which takes a large size of total expenditure, restricting the scope to raise the developmental expenditure especially on capital formation.
Judiesiz answered the question on July 10, 2018 at 07:13

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