Ownership Pattern of Public Debt in India: A Study

To bridge the inevitable gap between the expenditure and revenue of governments, public debt has been resorted to increasingly by government all over the world. In India too, public debt has been reckoned as a devise though which governments attempt to garner enough resources for both developmental and non-developmental activities. The present paper looks into the change and pattern in the ownership of public debt in India in recent years. In recent time, there has been a slight decline in the State government securities issued in India. Provident Funds have become dominant and permanent owners of state government securities in Indi, especially in recent times. Commercial banks in India are the main owners of GOI dated securities. Half of the T-Bills have been held by the Commercial Banks in the country. Mutual Funds also have been buying the Treasury Bills on a large scale. Provident Funds (PFs) do not seem to be interested in engaging in Treasury Bills operations in the country.


Introduction
It has well been acknowledged that every government, whether it is a government of capitalist or socialist system, has to deliver development and welfare oriented functions aiming at enhancing the standard of living of its people. Such a government, of course, may have to live beyond its means in implementing projects that increase both the quantum of public goods available for the masses and the volume of subsidies to enterprises which ensure that necessary products are available at affordable prices. This developmental function naturally increases the size of the government administration which scales up the administrative expenses of the government. Thus, as the size of the government widens, its development and non-development expenditures get escalated, sometimes even surpassing its resources. Many such governments have had to undergo all pressures of presenting a deficit budget where expenditure outweighs revenues. The burgeoning expenditure in excess of revenues has to be met through different strategies.
Broadly speaking, three strategies stand out in this respect: one is printing additional currencies which are technically called monetization of deficit and the other is borrowing from the general public including financial institutions, both inside and outside the country which is called 'Public Debt i '. And the other is to divest the shares of government in public sector units ii (PSUs). The first two have pros and cons, of course.
For instance, printing additional currencies do not put much pressure on the government but it fuels inflationary pressures in the economy which will have far reaching other economic, social and political repercussions. In the second method of borrowing from the public by the government that is public debt, while it does not create inflation rather than containing it by way siphoning off funds from people to government thereby reducing the purchasing power of people, it puts enormous pressure on the government because of it being a liability for the government to repay the public debt along with its interest rate in future. But in recent times much emphasis has been placed on indulging in public debt to make the both ends meet rather than going for printing additional currencies in the fear of it fueling inflationary flames in the economy.

Research Problem
As mentioned above, to bridge the inevitable gap between the expenditure and revenue of governments, public debt has been resorted to increasingly by government all over the world. In India too, public debt has been reckoned as a devise though which governments attempt to garner enough resources for both developmental and non-developmental activities. In fact, issue of public debt in India has a captive market for its operation.
Mainly these debts are held by commercial banks, insurance companies and provident funds which are owned and regulated by the governments. In this respect, the present works looks into the change and pattern in the ownership of public debt in India in recent years.

Objectives
The broad objectives of this paper are outlined below:  To examine the trend in the total amount collected using GOI dated securities and T-Bills  To analyze the role of different buyers in the debt market  To look into the growth rate of shares of ownership of different buyers

Methodology
The present paper has been prepared mainly on the basis of secondary data obtained from the website of RBI. Data have been properly structured and made amenable to the present works. Growth rates for different owners of the public debt have been computed.

Literature Review
A good number of works are available on different aspects pertaining to the public debt, its management and of course ownership pattern. A brief review of certain selected works on this is provided below.
It is obvious that public debt has been increasing in India. Investigating the trend in the public debt in India for the period during 1941 to 1974, Ghuge arrived at the conclusion that since 1956, public debt in India had increased. He also peeped into the association between public debt especially internal debt and other economic variables like fiscal deficit and monetary variables (Ghuge, 1977). domestic resources for economic development often rely on public debt. In this context the relation between economic development and public debt was studied by Lal (Lal, 1978).
Public debts which are used for assets generation fuels economic growth and development. Therefore deficits being bridged by public debt could economies to build enormous economic and productive assets which further add to the process of economic development of such economies. This aspect was looked into by Boskin (Boskin, 1982), and he found that when price level increase in the economy, the real value assets generated via public debt goes up while the burden public falls.
Bhattacharya B. B. and Guha Srabani in a study stated that the Internal Public Debt has also been rising very fast in many countries of the world-both rich and poor. But no general consensus regarding the optimum of level of internal public debt that minimizes consequences has been arrived at (Bhattacharya & Srabani, 1990).
Lekha. S. Chakraborthy in her study examined the impact on new economic policy on the public debt of India. The study focused on the servicing costs and other burden of public debt (Chakraborthy, 2002).
Kaushik Gangly in his study focused on the study on the public debt and examined the interest rates on which borrowings were made by the State governments (Ganguly, 2009).
Rangarajan C. & Srivastava D. K in their study analyzed the problem of debt sustainability to recommend the enactment of fiscal responsibility legislation in the current or modified forms (Rangarajan & Srivastava, Federalism and Fiscal Transfers in India, 2011).

Ownership Pattern of State Government Securities
In a federal financial system like India, most of the highly elastic and progressive sources of revenue rest with the Centre government but most of the developmental and welfare expenditure need to be met by the State governments. This being an important fiscal imbalance in federal structure, to address this problem inbuilt mechanisms have been suggested in the Constitution itself. Most often deprived of enough and affordable sources of finance, State governments have had to resort to the issue of government securities in open and captive markets to ensure the availability of necessary financial resources for the execution of administrative and developmental expenses.

Figure 2 Trends in Ownership Pattern of State Government Securities
Source: Constructed on the basis of Reserve Bank of India Data accessed from the www.rbi.org

Ownership Pattern of Government of India Dated Securities
Turning to the ownership pattern of government of India dated securities, it could be observed that there are generally three principal purchasers of such securities in India namely, Commercial Banks, Insurance Companies, Provident Funds and Reserve Bank of India, and therefore our discussion primarily confine to these four owners. Government securities market exhibits the mixed nature of Indian economy as most of the investors in the market are financial institutions owned and operated by the government (Rangarajan, 1971

Ownership Pattern of Treasury Bills
Treasury bills are also government securities or bonds with maturity of less than one year. They are issued to meet the difference between short period receipts and expenditures of the governments, and therefore this is regarded as money market instrument in India (https://economictimes.indiatimes.com/definition/treasury-bills).  (Table No:

Conclusion
The total volume of Public Debt and the changes in the ownership of Public Debt are closely associated with the structural changes taking place in an economy mainly in the financial sector. In order to meet the mismatch between the expenditure and revenue of governments, public debt has been resorted to increasingly by government all over the world. In India too, public debt has been reckoned as a devise though which governments attempt to garner enough resources for both developmental and non-developmental activities. It has been revealed in the study that in recent time, there has been a slight do not seem to be interested in engaging in Treasury Bills operations in the country.
i Public Debt connotes the total amount that the government of a country borrows. In India, it is the total liabilities of the Union government payable from the Consolidated Fund of India. State governments also incur public debt. The joint debt of Union and State government is called General Government Debt (GGD). ii The Disinvestment strategy is a post-reform phenomenon in India. In the first NDA government under Atal Bihar Vajpayee, the Ministry of Disinvestment was constituted under the stewardship of Mr.Arun Jaitly only for selling the Public Sector Units in India.