Interest Rate-Growth Differential

Interest Rate Growth Differential

"If the interest rate paid by the government is less than the growth rate, then the intertemporal budget constraint facing the government no longer binds."- economist Olivier Blanchard.

The “intertemporal budget constraint” means that any debt outstanding today must be offset by future primary surpluses.
If the Interest Rate-Growth Differential (IRGD), the difference between the interest rate and growth rate, becomes negative, the governments need not worry about deficits since the growth would take care of the interest payment obligations. This would ensure the sustainability of public debts.
The Economic Survey argues that in India, the growth rate is higher than the interest rate most of the time. So the conventional restraints on the fiscal policy may not be the right way ahead given the serious contraction of the Indian economy.
Washington Consensus - It is a framework that advocates for macroeconomic stability.
- Macroeconomic stability roughly means that the borrowing done to finance the deficit of a country must be kept to a minimum.
- This is a concept in peril as the economies of the world look to fight the after-effects of COVID-19 induced slowdown successfully.

Source: TH

Join Our Telegram

Oceanic Anoxic Event 1a and MASS EXTINCTION

Oceanic Anoxic Event 1a and MASS EXTINCTION

25 Dec, 24
SHARE

Oceanic Anoxic Event 1a from the Paris Basin (Environment) Paper-3 PMP OAE 1a refers to a period during the Cretaceous Period (145 million years ago and ended 66 million years ago) when Earth's oceans became depleted of oxygen, causing a significant disruption in marine life. Cause: The event is believed to have been

Viksit Panchayat Karmayogi (Good governance)

26 Dec, 24
SHARE

Viksit Panchayat Karmayogi (Good governance) Governance GS PAPER-2 PMP Dr. Jitendra Singh launched the ‘Viksit Panchayat Karmayogi’ initiative on Good Governance Day, celebrated to mark the 100th birth anniversary of former Prime Minister Atal Bihari Vajpayee. The initiative, which is part of the broader ‘Prashasan Gaon

Major programmes to control Air Pollution

23 Dec, 24
SHARE

Major programmes to control Air Pollution National Clean Air Programme? It was launched by the Ministry of Environment, Forests and Climate Change (MoEFCC) in January 2019. It is the first-ever effort in the country to frame a national framework for air quality management with a time-bound reduction target. The

Air pollution and Air quality Measures in India

21 Dec, 24
SHARE

Air pollution and Air quality Measures in India (Environment) GS Paper-3 P-M-P Air pollution may be defined as the presence of any solid, liquid or gaseous substance including noise and radioactive radiation in the atmosphere in such concentration that may be directly and/or indirectly injurious to humans or other l

Geopolitical Significance of Ports

20 Dec, 24
SHARE

Geopolitical Significance of Ports (IR) Act as geopolitical assets: Ports enhance the projection of strategic reach, which helps strengthen the country’s control over important sea and energy supply routes. E.g. Indian Navy’s staging base at Agalega Islands will enable marine patrols