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What happens to international business when a country's debt increases?


explain the answer with scenarios with respect to india

The impact on business is determined by the significance of the impact on whether the currency is being devalued and whether the country is able to pay to service the debt. Through the eighties and nineties, India had not borrowed much money from international sources and while this was good in that they appeared not to be caught in the international banking crisis of the mid nineties and had relatively little costs associated with servicing the minimal debt. The downside was that they stifled the economic growth of the country by not borrowing to allow businesses to prosper. In a span of just a few years, India's debt increased nearly 300 percent and the costs associated with servicing this much debt are burdening the government. This burden is not being outrun by the prosperity it is bringing now. The currency is devalued and while it appears to be a good choice to do business within India, it is not an ideal time to increase investment there.

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