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Question
How does net debt differ from gross debt?
Distinguish Between
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Solution
| Sr. No. | Gross Debt | Net Debt |
| 1. | Gross debt is the total outstanding debt of the government. | Net debt is gross debt minus the government's financial assets. |
| 2. | It includes all internal and external borrowings. | It represents the actual debt liability of the government. |
| 3. | It does not deduct cash balances or financial assets. | It is calculated after deducting cash balances and financial assets. |
| 4. | It is always higher than or equal to net debt. | It is lower than gross debt because financial assets are deducted. |
| 5. | It shows the total amount borrowed by the government. | It shows the government's real debt burden after adjusting for financial assets. |
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