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 "Strategic thinking in public finance")
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Illustration: Binay Sinha
Given the limitations of GDP measurement in India, measures such as the interest payment to revenue receipts (IP/RR) ratio are desirable. About 40 per cent of revenue receipts now go to interest payments. In the world of corporate finance, the term “operational leverage” is used to convey the pressure of locked-in payments that are akin to debt-servicing obligations. Indian public finance faces overt leverage (which demands debt servicing) and operational leverage (commitments to pay wages and pensions), which limits the room for manoeuvre.
Every borrower runs the risk of falling into a “debt trap”: Where debt is repaid through borrowing.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
First Published: Feb 01 2024 | 11:28 PM IST
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