External Debt and its Impact on Economic Development – A Case of BRICS Nations

Abstract

Economic growth of a country carries its image in international markets and public debt forms part of its country's economic activity. Economies need funds for economic development and public borrowings become necessary to achieved it. While the developed economies are self-sufficient in terms of innovation and technological advancement, the smaller and developing economies have to make up their value addition and build up their competitive advantage. The study seeks to determine relationship between public debt and economic growth and to see if any policy changes can combat crisis and achieve economic progress. The study is premised on the understanding that many countries have been facing issues with external debt. Therefore, the study constructs a framework for rationalization of impact of government's external debt on economic growth of select countries, Brazil, Russia, India, China and South Africa (BRICS). Panel data analysis are conducted to provide a framework to check if there is any relationship between government's external debt and economic growth. It would be a useful exercise to find out the impact of former on the latter and the extent of the effect based on select factors.