Assertion (A): Government debt need not be considered burdensome when the borrowed funds are invested in infrastructure whose return is greater than the rate of interest.
Reason (R): In such a case, the actual debt could be paid off by the growth in output.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): Government debt need not be considered burdensome when the borrowed funds are invested in infrastructure whose return is greater than the rate of interest. — True. Such investment can leave future generations better off.
Reason (R): In such a case, the actual debt could be paid off by the growth in output. — True. The return is higher than the interest, so output grows enough to pay the debt.
Why R explains A?
A says the debt is not a burden. R gives the reason: the extra output from the infrastructure pays off the debt. Debt is a burden only when it reduces future growth, and here it raises growth.
NCERT (2026-27): “Other Perspectives on Deficits and Debt: … Also, if the government invests in infrastructure, future generations may be better off, provided the return on such investments is greater than the rate of interest. The actual debt could be paid off by the growth in output. The debt should not then be considered burdensome. The growth in debt will have to be judged by the growth of the economy as a whole.” “Summary 6. Public debt is burdensome if it reduces future growth in output.” |