Q.What is public debt? Distinguish between internal debt and external debt.

Public debt is the accumulated borrowing of the government, and it is classified by whether the lender is domestic or foreign.

Public debt is the total accumulated stock of borrowings that a government owes at a given point in time, built up because expenditure has, over the years, exceeded revenue receipts, requiring the gap to be financed through borrowing.

Public debt is classified by the source of the borrowing:

• Internal debt is borrowed from within the country — from commercial banks, financial institutions and the general public, typically through instruments such as government securities (G-Secs) and treasury bills. It is repayable in domestic currency and does not directly create a foreign-exchange obligation.
• External debt is borrowed from foreign governments, international institutions (such as the World Bank or IMF) or foreign capital markets. It is usually repayable in a foreign currency and therefore exposes the government to exchange-rate risk in addition to the repayment burden itself. …

Students sometimes equate 'public debt' only with external/foreign borrowing — in most economies, including India, the bu …