Fiscal Deficit of India: Why it is in News in 2023 (Effective Guide)

Understand the Fiscal Deficit: Overview

In This Article we would cover all the relevant details of Fiscal Deficit of India and what is the impact on our economy. Every year the government spends more than what it earns, for example, whatever money the government collects from taxes etc. The difference that comes between this less earning and more expenditure is called Fiscal Deficit. The government also compensates this financial deficit by issuing bonds and securities to foreign investors.

If the fiscal deficit increases, it means that the borrowing of the government will increase and if this borrowing increases, the government will have to pay more interest, so it is very important to keep the fiscal deficit under control for the growth of the economy.

Fiscal deficit is that part of the budget expenditure which is met by borrowing. Just as it is necessary to control the expenses for the budget of your house, in the same way it is considered very important to control the financial deficit for the growth of the economy. This difference between the government’s total expenditure and total revenue is also called fiscal deficit, apart from being called ‘fiscal deficit’ and ‘fiscal deficit’.

The Shortfall in the government’s income to its expenditure is called Fiscal deficit. A fiscal deficit is calculated as a percentage of gross domestic product (GDP) or simply speaking, more dollars are spent than income. In any case, the income figures only include taxes and other revenues and do not include money borrowed to cover the deficit. Fiscal deficit is different from fiscal debt. Fiscal debt is the total debt accumulated during the years of fiscal expenditure.

Fiscal Deficit of India
Fiscal Deficit of India

Fiscal Deficit Increased to 4.51 lac crore, Total Expenditure 10.5 lac crore

Figures of C.G.A. (Controller General of Accounts)

The fiscal deficit of the Center increased to 25.3 per cent of the target set for the entire financial year in the April-June quarter of the current financial year 2023-24. The fiscal deficit in the same quarter of 2022-23 was 21.2 per cent of the budget estimate.

According to the data released by the Controller General of Accounts (CGA), the fiscal deficit stood at Rs 4,51,370 crore in real terms at the end of June. The difference between government revenue and expenditure is called fiscal deficit. It has been targeted to be limited to 5.9 per cent of the gross domestic product (GDP) in the budget of 2023-24. In the last financial year this G.D.P. was 6.4 percent.

According to the data, the government’s net tax revenue in the first three months of the current financial year stood at Rs 4,33,620 crore. This is 18.6 percent of the budget estimate. The net tax collection in the same quarter of 2022-23 was 26.1 per cent. The Centre’s total expenditure in the April-June quarter stood at 23.3 per cent of the budget estimate, or Rs 10.5 lac crore.

It was 24 per cent in the same quarter of the previous financial year. Talking about the total expenditure, out of the revenue expenditure, Rs 7.72 lac crore and Rs 2.78 lac crore went from the capital account. Of the total revenue expenditure, Rs 2,43,705 crore was spent on interest payment and Rs 87,035 crore on principal subsidy.

  • 25.3% Fiscal deficit reached in first quarter of 2023-24.
  • Net tax collection was more than 4.33 lac crore.

$1.98 Billion Less Forex :

The country’s foreign exchange reserves declined by $1.987 billion to $607.035 billion in the week ended July 21. In the previous week, it had increased by $ 12.74 billion to reach $ 609.022 billion. In October 2021, the foreign exchange reserves were a record 645 billion dollars.

  • According to RBI, the foreign currency assets declined by $2.414 billion to $537.752 billion in the week ended July 21.
  • The Gold Reserves reached $45.614 billion, while earlier it was $417 million.
  •  IMF The country’s reserve position increased by $21 million.

Find Some Reason of Fiscal Deficit of India : 

  • The Shortfall of revenue or excessive increase in capital expenditure is called fiscal deficit.
  • Due to more import of crude oil, the expenditure of the government increases, due to which the fiscal deficit increases.
  • Importing more gold also increases the amount of fiscal deficit.
  • Due to higher amount of government borrowing, more interest has to be paid, which increases the expenditure.
  • Subsidies given by the government on food, fertilizers, export items etc.

Effects of High Fiscal Deficit of India :

  • Due to high fiscal deficit, the credit rating of the country is reduced by the credit rating agencies. Due to which investors demand more interest from the government in return for buying government securities.
  • In the event of government securities not being sold, they are bought by the Reserve Bank, for which the Reserve Bank needs to print more notes, which increases inflation.
  • The process of reducing the fiscal deficit by the Reserve Bank by printing more notes is called deficit monetization.
  • Due to the poor credit rating of the country, the amount of foreign investment coming in also decreases.
  • Due to high fiscal deficit, the government gets trapped in the debt trap, because to meet the fiscal deficit, the government has to take loans, due to which more money is spent in the payment of interest, the fiscal deficit of the government increases even more.
  • Industrial development can be affected due to non-availability of loans to the private sector due to the government taking loans from banks.
  • A reasonable level of fiscal deficit is considered by some to be a positive economic phenomenon, as a fiscal deficit means that the government is spending more on welfare schemes, which will spur growth and increase demand.
  • This will lead to the development of the economy as production will have to increase due to increase in demand, which will also increase employment opportunities.

Measures to Reduce Fiscal Deficit of India :

  • To reduce fiscal deficit, the government should increase revenue receipts through tax and non-tax receipts. For this, tax rates can be increased.
  • Fiscal deficit can also be reduced by reducing revenue expenditure.
  • Fiscal deficit can also be reduced by rationalizing the amount of subsidy given by the government.
  • The government should encourage the private sector for infrastructure investment so that the expenditure of the government can be reduced.
  • By issuing bonds, the government can raise funds from the capital market.
  • The amount of fiscal deficit can also be reduced by disinvestment of government undertakings.
Know About CGA and CAG : Read More with official website


Conclusion on Fiscal Deficit of India:

If we talk about the Fiscal Deficit of India, Everyone knows that the government makes a deficit budget. But how much should this loss be, the important point is this. It is generally said that if the loss is within a certain limit then it is correct. If the deficit remains around this then it is fine, but the market does not like to have excessive fiscal deficit.

By borrowing from somewhere, from foreign investors (FIIs), issuing bonds or securities, the government compensates for this financial deficit. The increase in fiscal deficit means that the borrowing of the government will increase. And if the borrowing increases, then the government will have to pay more interest. For the growth of the economy, it is very important to keep the fiscal deficit under control.

Friends, how did you like this article of Fiscal Deficit of India, please send us your valuable suggestions, so that we continue to provide you with more and more valuable information, we have compiled our article from many important sources and shared it for you in simple words, If there is any deficiency, or there is a need for improvement, then please write it in the comment box. Thank you


Also Read Some Useful Article

Types of Budget in India: A Quick and Perfect Guide in 2023


Old Pension Scheme, OPS Vs NPS, PRAN Card, OPS Full Form: Powerful Guide in 2023

4 thoughts on “Fiscal Deficit of India: Why it is in News in 2023 (Effective Guide)”

Leave a comment