FISCAL
DEFICIT - ECONOMY
News:
Govt's fiscal deficit rises to 39.3% of
annual target
What's
in the news?
●
Recently, the Central government's fiscal
deficit touched 39.3% of the full year target in the first half of the current
financial year, slightly higher than 37.3% recorded in the year-ago period.
About
Fiscal deficit:
●
Fiscal deficit is the difference between the government's total expenditure and its total
revenue (excluding borrowings).
●
It is an indicator of the extent to which
the government must borrow in order to finance its operations and is expressed
as a percentage of the country's GDP.
●
A
high fiscal deficit can lead to inflation, devaluation of the currency and an
increase in the debt burden.
●
While a lower fiscal deficit is seen as a
positive sign of fiscal discipline and a healthy economy.
Positive
aspects:
●
High fiscal deficit enables the government
to spend more in public spending and Infrastructure creation.
●
More jobs will be created, unemployment
will be reduced.
Negative
aspects:
●
High fiscal deficit requires the
government to borrow heavily.
●
Large borrowing by the government can lead
to a crowd out effect.