A Brief History of Public Debt in India

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Towards the eighteenth century, the borrowing needs of Indian Princely States were
largely met by Indigenous bankers and financiers. The concept of borrowing from the
public in India was pioneered by the East India Company to finance its campaigns in
South India (the Anglo French wars) in the eighteenth century. The debt owed by the
Government to the public, over time, came to be known as public debt. The endeavours
of the Company to establish government banks towards the end of the 18th Century
owed in no small measure to the need to raise term and short term financial
accommodation from banks on more satisfactory terms than they were able to garner
on their own. The incentive to set up Government banks (read central banks), had a lot
to do with debt management.

Public Debt, today, is raised to meet the Governments revenue deficits (the difference
between the income of the government and money spent to run the government) or to
finance public works (capital formation). Borrowing for financing railway construction
and public works such irrigation canals was first undertaken in 1867. The First World
War saw a rise in India's Public Debt as a result of India's contribution to the British
exchequer towards the cost of the war. The provinces of British India were allowed to
float loans for the first time in December, 1920 when local government borrowing rules
were issued under section 30(a) of the Government of India Act, 1919. Only three
provinces viz., Bombay, United Provinces and Punjab utilised this sanction before the
introduction of provincial autonomy. Public Debt was managed by the Presidency
Banks, the Comptroller and Auditor-General of India till 1913 and thereafter by the
Controller of the Currency till 1935 when the Reserve Bank commenced operations.

Interest rates varied over time and after the uprising of 1857 gradually came down to
about 5% and later to 4% in 1871. In 1894, the famous 3 1/2 % paper was created
which continued to be in existence for almost 50 years. When the Reserve Bank of India
took over the management of public debt from the Controller of the Currency in 1935,
the total funded debt of the Central Government amounted to Rs 950 crores of which
54% amounted to sterling debt and 46% rupee debt and the debt of the Provinces
amounted to Rs 18 crores.
Broadly, the phases of public debt in India could be divided into the following phases.

Upto 1867: when public debt was driven largely by needs of financing campaigns.

1867- 1916: when public debt was raised for financing railways and canals and other
such purposes.

1917-1940: when public debt increased substantially essentially out of the

considerations of

1940-1946: when because of war time inflation, the effort was to mop up as much a
spossible of the current war time incomes

1947-1951: represented the interregnum following war and partition and the economy
was unsettled. Government of India failed to achieve the estimates for borrwings for
which credit had been taken in the annual budgets.

1951-1985: when borrowing was influenced by the five year plans.

1985-1991: when an attempt was made to align the interest rates on government

securities with market interest rates in the wake of the recommendations of the
Chakraborti Committee Report.

1991 to date: When comprehensive reforms of the Government Securities market were

undertaken and an active debt management policy put in place. Ad Hoc Treasury bills
were abolished; commenced the selling of securities through the auction process; new
instruments were introduced such as zero coupon bonds, floating rate bonds and capital
indexed bonds; the Securities Trading Corporation of India was established; a system of
Primary Dealers in government securities was put in place; the spectrum of maturities
was broadened; the system of Delivery versus payment was instituted; standard
valuation norms were prescribed; and endeavours made to ensure transparency in
operations through market process, the dissemination of information and efforts were
made to give an impetus to the secondary market so as to broaden and deepen the
market to make it more efficient.

As at the end of March, 2003, it is estimated that the combined outstanding liabilities of
the centre and state governments amounted to Rs 18 trillion which worked out to over
75 percent of the country's gross domestic product (GDP). In India and the world over,
Government Bonds have, from time to time, have not only adopted innovative methods
for rasing resources (legalised wagering contracts like the Prize Bonds issued in the
1940s and later 1950s in India) but have also been used for various innovative schemes
such as finance for development; social engineering like the abolition of the Zamindari
system; saving the environment; or even weaning people away from gold (the gold
bonds issued in 1993).
Normally the sovereign is considered the best risk in the country and sovereign paper
sets the benchmark for interest rates for the corresponding maturity of other issuing
entities. Theoretically, others can borrow at a rate above what the Government pays
depending on how their risk is perceived by the markets. Hence, a well developed
Government Securities market helps in the efficient allocation of resources. A country’s
debt market to a large extent depends on the depth of the Government’s Bond Market.
It in in this context that the recent initiatives to widen and deepen the Government
Securities Market and to make it more efficient have been taken.

The Finance
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What is debt management

Debt management, by the standard financial definition, involves a designated third party
assisting a debtor with repayment of his or her debt. Many companies specializing
in credit counseling offer debt management plans to help people with heavy debt and
damaged credit get their financial situation under control. A simpler definition
ofdebt management could be the routine practice of spending less than one earns.
However, for all intents and purposes, debt management is a structured repayment plan
set up by a designated third party, either as a result of a court order or as a result of
personal initiation.

A debt management plan entails a series of steps, which the third party service works
on with the help of the debtor. The first step typically involves compiling a list of all
creditors and the amounts owed to each. Some creditors are not eligible to be included
in a debt management plan, and typically, secured debt such as car loans and home
loans are not included.

Once a list of creditors is compiled and the amount of debt is totaled, the debtor’s total
income and expenditures, such as mortgage or rent payments, car payments, cost of
living expenses, and so forth, are totaled as well. The third party agency assisting with
the debt management plan then helps the debtor to determine the maximum amount of
money available to allocate to the plan for debt repayment. In many cases, a third party
service will attempt to settle some debt amounts and exclude or lower any interest
charged during the repayment period. However, it’s important to understand that
participating in a debt management plan will still impact your credit score, and that
any available credit may be inaccessible for a period of time. Further, if you have less
than 10,000 US dollars (USD) of debt, you may not qualify for a third party service.

List of Debt Management Companies

Here is a list of some of the best debt management companies whose services are
reputed and recommended all over the world! This debt management companies list
also includes some names which you may not have heard before but that doesn't mean
they are not good. All of these companies are touted as providing good quality
professional service by most of their clientèle.

 Ameridebt
 Premier Financial Debt Help
 Forget Unsecured Debt
 Consumer Credit Counseling Service
 Credit Solutions of America
 Federal Credit Union
 American Debt Consolidation
 DebtShield
 Hoffman, Brinker & Roberts
 Franklin Debt Relief
 NetDebt
 Superior Debt Relief Services
 Integrity Debt Relief Group
 ClearOne Advantage
 GHS Solutions
 Free Life Financial Corp
 American Financial Service
 Debt Settlement USA
 Clear Choice Debt Relief
 Superior Debt Relief Services
 American Debt Services
 CareOne Providers
 Delray Credit Counseling
 Credit Solutions
 ACCC Consumer Credit
 Debt Consolidation Connection
 CuraDebt
 Credit Solutions Phoenix
 Gibson Trust
 Jabez Financial Group Inc.
 A1 Debt Consolidators
 Amalgamated Debt Counselors

Debt Management Companies: How do They Work?

Before proceeding to the debt management companies list, let's take a brief look at how
debt management companies work. As third party professionals, debt management
companies act as intermediaries between the borrower and the lender. Whether or not
the conditions for payment of the debt are accepted by the creditor depends upon the
latter. A good debt relief company is one which advises you meet your priority expenses
first and then pay your installment from the remaining money, depending upon how
much you can realistically afford at one go. Priority expenses may include expenses
incurred on food, rent, mortgage, health, education, etc. Most of the times, debt
management companies alleviate a creditor's doubt that the debtor is not paying as
much he can reasonably afford by reviewing the debtor's financial situation periodically
and reporting the same to the creditor.

What is a Debt Management Program

There are basically several sub-services that are included in the debt management
program, which help you to repay your debts properly. The primary service of all debt
management services is debt advice and a repayment plan. In such a plan, the debt
management services provide their clients with a thorough calculated working of
repayment. While sketching out the repayment plan, the service providers take into
consideration several aspects of debts. Namely,

 The due dates of installments and credit card companies.

 Late payment charges and extra service fees of every creditor. The debt
management service consultants also often consider the effect of late payment
on credit reports.
 In many cases the debt management services also consider the variable APRs
(Annual Percentage Rate). They will advise their customers to follow some or the
other spending schedule and repayment mechanism, so as to keep a check on
the excessive rise of APR.

In addition to these preliminary services, debt management companies also provide

their clients with several additional services such as credit counseling. In such services,
consumers sit across the table and the counselor explains the different calculations and
mechanisms of credit and financial services. Several debt management services
provide their clients with debt negotiation and debt settlement procedures where the
company negotiates a lowered rate of debt repayment with the creditors. You may also
find a debt management affiliate program that provide the clients with debt financing 

Debt Management Programs: Pros and Cons

 Pros
 1. The first advantage of the program is that it successfully reduces your
over flowing debt without harming any of your personal assets.
2. The second advantage of the debt management program is that the credit
report is not affected drastically and credit score also does not suffer.
3. Proper planning, and in some cases negotiation, has a really good result
as the debt is repaid quickly without the unnecessary APRs and fees.
 Cons
1. There are not many disadvantages, the first one being that a substantial
fee or commission is charged by the debt management program.
2. The second probable disadvantage is that the debt negotiation process
harms the credit report and reduces the credit score.
3. The third disadvantage is that the program counselor may ask you to shut
down some of your credit cards, though this should not be actually viewed
as a disadvantage