The Survey remarks that the increase is mainly contributed both by market borrowings and "other internal liabilities". This shows an increase in the growth of internal liabilities to 15.6 per cent in 1997-98 from 12 per cent in 1996-97, it says. Reflecting this trend aggregate internal liabilities as a proportion of GDP increased to 50.8 per cent in 1997-98 from 48.7 per cent in 1996-97.

The Survey remarks that the process of fiscal correction undertaken over the last few years has had a moderating influence on the accumulation of aggregate internal liabilities of the Central government.

External liabilities, the Survey notes have increased to Rs 55,242 crore in 1997-98 from Rs 54,238 crore in 1996-97. But external liabilities estimated in the budget are athistorical rates of exchange, hence they do not reflect the actual repayment liability. At historical rates the ratio of external debt stock to GDP has shown a downward slide for many years, the Survey says.

It notes that the repayment burden of the debt stock is better reflected by valuing the debt stock at exchange rates at the end of the relevant fiscal year. When this is done, external liabilities as a proportion of GDP turns out to be much higher, although the ratio has shown a declining trend since 1991-92, it says.

Interest payments which form the largest single item of government expenditure have come down by Rs 2,300 crore for fiscal 1997-98, the Survey notes. But with government receipts sliding down last year, interest payments will take up a larger chunk of total revenue for 1997-98, the it underscores.

Gross interest payments in 1997-98, which were budgeted at Rs 68,000 crore are now placed at Rs 65,700 crore as per the revised estimate for 1997-98. These payments are estimated to absorb47.4 per cent of total revenue receipts according to revised estimates in 1997-98 compared with a similar ratio of 47.1 per cent in 1996-97, the Survey says.

As a proportion of GDP, interest payments have hovered between 4.5 to 4.7 per cent of GDP between the years 1995-96 and 1997-98. The Survey emphasises that strategies to restrain growth of borrowing and subsequent interest outgo will have significant impact on total expenditure.