#Economy Budget 2024- How is our money spent? High interes | VK IAS- prelims (UPSC highlights)
#Economy
Budget 2024- How is our money spent?
High interest payments can: Reduce the money available for welfare programs and services. Decrease funds for capital expenditures (CapEx), which are crucial for long-term investments in infrastructure and development. Affect the country's sovereign credit ratings negatively, making borrowing more expensive. Create a cycle of debt where the government ends up borrowing more to pay off existing loans.
Relevant concept here : Ricardian equivalence- It is an economic theory suggesting that government borrowing doesn't affect the overall level of demand in the economy because people anticipate higher taxes in the future to pay off the debt, leading to an increase in savings.
