Fiscal Deficit

Fiscal Deficit:
  • The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government.

  • The fiscal deficit can arise either due to revenue expenses overshooting income or increase in capital expenditure.
  • A fiscal deficit is usually calculated and expressed as a percentage of a country’s Gross Domestic Product (GDP).
  • A deficit is usually financed through borrowing from either the central bank of the country or raising money from capital markets by issuing different instruments like treasury bills and bonds.
  • In India, the Fiscal Responsibility and Budget Management Act suggests that bringing the fiscal deficit down to about 3 percent of the GDP is the ideal target.
  • However, successive governments have not been able to achieve this target.

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