A large body of literature has concluded that bond finance of the deficit is unstable because of rising interest payments on the debt. This paper criticizes this literature in detail, focusing on the Blinder-Solow and Sargent-Wallace papers. It argues that conclusions regarding a debt trap under...

There is a broad consensus that India's fiscal situation worsened over the 1990s due to a sharp rise in the revenue deficit, which in turn has raised interest rates, crowded out private investment and hindered growth. This article critiques this consensus view. It shows, using Domar arithmetic,...