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Questions
What is debt trap?
Explain the term debt trap.
Answer in Brief
Solution 1
Debt trap is a situation where a new debt is is added in order to pay an existing debt. This is an incentive structure that lures individuals into accepting long-term debt obligations under conditions that strongly favour the lender.
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Solution 2
Debt trap refers to a situation when the government of a country has to raise fresh loans just to pay the interest charges on the earlier loans borrowed. The government is trapped in a vicious circle of borrowing. Under it, the government has to go on borrowing after borrowing. India is heavily in a situation of debt trap. The government debt is approximately 65% of its GDP. This deadly disease is called the debt trap.
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