Economy is about confidence. When a bond is issued by a Government, it promises to pay back the bearer in future. The bearer is confident that his/her money will be paid back by the Government.
The world relies on confidence between people, banks, governments and countries. If a link is broken in a chain of transactions between any two players, then it is breach of confidence that creates enmity, hatred, litigation and bankruptcy.
Governments all over the world try to ensure the wheels are running, the chain intact, ensuring the economical and financial parameters are always kept in balance. So when a government borrows money to spend on its people, it is expected that the borrowings never cross a threshold limit. If it does, the burden of debt it borrowed falls on its people. Not only that, people are forced to pay more taxes when the government hikes up the tax rates to increase revenue to pay back its debts.
An efficient government spends money only on developmental related work, GDP growth initiatives and upliftment of needy but most of the time the funds go for appeasement of certain sections of people and other wasteful expenditure. Recently a state government in India came out with a white paper on its financial status that revealed that each household in that state carries a debt burden of Rs 263000 ( approx $3500). What a sorry state of governance! In Indian ethos, borrowing beyond one’s personal repayment capability is always frowned upon and people have grown imbibing the culture over many generations until credit card and personal loan offers came into their life and made them spendthrifts.
A Government needs to be extremely prudent in managing its revenues and debts and work towards a path of growth of its economy and people. The day the politicians and bureaucrats realise they are duty bound to keep the people happier that will be the day the true meaning of good governance is felt. Until then, it is a life of misery and sorrow.
THE PULSE by Sivakumar Gopal 