Whats debt trap in economics.whats the external and internal debt of india in 2007

Question

Whats debt trap in economics.whats the external and internal debt of india in 2007

Answer 1

In the language of economics, credit and debt are related but not the same. In fact, credit and debt operate in reverse relations. Credit requires a positive net worth and debt does not. One can have good credit and no debt. Too much debt lowers credit rating. When one understands credit, one understands the main force behind the modern economy, which is driven by credit and stalled by debt. Behaviorally, debt distorts marginal utility calculations and rearranges disposable income. Thus debt turns more commodities into Giffen goods and creates what US Federal Reserve Board chairman Alan Greenspan calls "irrational exuberance", the economic man gone mad.

Human behavior is complex beyond the measurement of price. Price alone is not sufficient to influence market behavior. Karl Marx dealt with the concept of fetish as a factor in demand as expressed in price.

Sources said the government is apprehensive about excessive external funds raised by smaller players in real estate sector, where prices have almost doubled in past two years. Further, excessive flow of funds also impacts inflation, they said.

In fact, debt raised by the Indian companies through ECB is now estimated to have reached USD 24 billion during last fiscal, which is substantially higher than the internal cap of USD 22 billion put up by the government.

According to figures released by Reserve Bank, about 812 companies have raised about USD 20.24 billion through ECBs during the April 2006-February 2007 period