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Meaning of public debt
The borrowings taken by the authority to finance their developmental activities, apart from the public earnings, are referred to as public debt.
Objectives of public debt
The government usually turns to this debt to meet three sorts of expenses.

a)To meet budget deficit
It is not always appropriate to increase the taxes on individuals whenever the expenditure of the government exceeds revenue. So this is where public debt comes into play. If the budget deficit created is casual, then it can raise public debt. But, if it’s a regular thing, then the government has to raise taxes.

b)To meet situations like war
Public debt earned great importance during the times of World War II. Nations take this up to finance their expenditures during the war.

c)For development purposes
The authorities also take it to finance and fund the development projects. This gained much importance during the British regime when the public debt was raised for the objective of development in India.

Types of Public debt
The structure of public debt varies from country to country. It is not uniform throughout the world, because of changes in the conditions and purpose. There are several types of public debt. Based on that, public debt is categorized into:

1)Internal and external debt
Amounts owed to the citizens and corporations within the country are referred to as internal debt. On the other hand, the debt owed to foreigners and international agencies is classified under external debt.

2)Short term and Long term loans
This classification is based on the duration period from taking up debt and then repaying it with interest. Short-term loans are taken up to cover temporary deficits of the country, whereas the long term is turned to for development in the country.

3)Funded and Unfunded debt
Funded debt is a long-term debt reimbursed through a separate account made by the government. On the other hand, the unfunded one is a short-term debt whose reimbursement is made out of the public revenue.

4)Voluntary and Compulsory Loans
In normal times, the loans lent by the individuals are under their willingness, this is termed as voluntary loans. However, during times of emergencies, the lending can also be involuntary. This is termed a compulsory or forced loan.

5)Redeemable and irredeemable debt
Redeemable loans carry with them a promissory date of repayment of the debt. But in the case of irredeemable, there is no kind of promissory date for the reimbursement. However, interest is paid regularly to the lenders.

6)Productive and Unproductive Debt
When the debt is used up on income-earning enterprises, then it is referred to as productive debt. On the other hand, if the activity doesn’t yield any income to the government, then it is termed an unproductive debt.



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