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Explain the concept of fiscal deficit in the govt. Budget. What does it indicate? |
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Answer» It is excess of the government total expenditure over the government total receipts net of the borrowings during a fiscal year. Fiscal deficit = fiscal government total expenditure – fiscal government total receipts (net of the borrowing). Fiscal deficit indicates the total borrowing requirements of the government. Borrowing not only involves repayment of loan but also require payment of interest. If government borrows from RBI prints new currency it increases the money supply and creates inflationary pressures. If government borrows from rest of the world its raises it dependence on other countries. |
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