Budget 2019: Whom does the govt borrow from?

Market borrowing is the major source to finance fiscal deficit.

Whom does the govt borrow from?

It borrows from the market, small savings fund, state provident funds, external assistance and short term borrowings. Market borrowing, however, is the major source to finance fiscal deficit.

 

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Does borrowing too have an adverse impact on the economy?

Yes. It has two kinds of impact. One, if the govt borrows more from the market, it implies that it has left very little space for the private sector and corporates to access the market.

Secondly, large govt borrowing shoots up the interest rates for all other borrowers in the market, in turn it increases the debt repayment burden of the government and also pushes up the rate of investment in the economy which in turn leads to slowing economic growth.

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