Context:

• The Centre’s fiscal deficit for the first three months of fiscal 2020-21 was ₹6.62 lakh crores, which is 83% of the budgeted target for the year.
• Given the government’s additional borrowing plans, both to meet stimulus spending and bridge the revenue shortfall as a result of the pandemic, the fiscal deficit may end up as high as 8% of GDP, far exceeding the budget’s goal of 3.5%.

Fiscal Deficit definition:

• Fiscal Deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure. A fiscal deficit situation occurs when the government’s expenditure exceeds its income.
• This difference is calculated both in absolute terms and also as a percentage of the Gross Domestic Product (GDP) of the country. A recurring high fiscal deficit means that the government has been spending beyond its means.
• The government meets the fiscal deficit by borrowing money. In a way, the total borrowing requirements of the government in a financial year is equal to the fiscal deficit in that year.

Reference:

https://www.thehindu.com/business/Economy/fiscal-deficit-touches-83-of-full-year-target/article32243561.ece#:~:text=FY21%20fiscal%20deficit%20may%20go,the%20year%2C%20official%20data%20show.

Download PDF