Question

Many governments take foreign loans. Are these loans beneficial for gross domestic product? Why, or why not?

Answer 1

These loans are not beneficial for gross domestic product because of following reasons-

1 It leads to budget deficit.

2 The key investment in our future are at risk.

3 If government take loans then debt increase and income decrease

4 Higher interest rate crowd out public investment that can fuel economic growth.

5 It will leads to fiscal policy which laid bad impact on private sector.

6 It will increase the cost of borrowings .

7 It becomes difficult for government to raise revenue to meet their expenditure.

8 The GDP rate will decreases as debt by govt increase.

9 There will be higher interest payments and tax rate hikes by the government.

10 The national saving reduces.