What is the concept of fiscal deficit in the Indian economy
Fiscal deficit refers to the difference between the government's total expenditure and its total revenue. It is an important economic indicator as it helps assess the government's borrowing requirements.
- Fiscal deficit is the difference between the government's total expenditure and its total revenue in a financial year. It includes both revenue deficit (when revenue expenditure exceeds revenue receipts) and capital expenditure (when capital receipts are less than capital expenditure).
- It is an important economic indicator as it helps assess the government's borrowing requirements. When a government spends more than its revenue, it needs to borrow from various sources to finance the deficit.
- Fiscal deficit is an indication of the government's financial health and economic stability. A high fiscal deficit signifies that the government is not managing its finances well and may have to resort to borrowing at higher interest rates, leading to an increase in public debt.
- Reducing fiscal deficit is crucial for maintaining macroeconomic stability. It helps control inflation, promote investment, and maintain a healthy debt to GDP ratio.
- The Indian government aims to keep the fiscal deficit within a targeted range to ensure sustainable economic growth. The Fiscal Responsibility and Budget Management Act (FRBM Act) provides guidelines for fiscal deficit targets.
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