Fiscal Deficit is the difference between a government’s total expenditure and its total revenue (excluding borrowings). It represents the total borrowing requirement of the government.

Calculation

  • Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts),

Economic Implications

  • High deficits can lead to “Crowding Out” (reducing capital available for private investment), inflationary pressure, or a “Debt Trap” where interest payments consume a majority of revenue. 

 

Source: The Hindu