Economics • Indian EconomyMedium
What does 'Fiscal Deficit' signify in the context of government budgetary management in India?
A. The excess of total government expenditure over total non-debt receipts, indicating the total borrowing requirement of the government during a financial year.✓ Correct Answer
B. The difference between revenue receipts and revenue expenditure, highlighting current consumption imbalances.
C. The total accumulated debt owed by the central government to foreign creditors over successive decades.
D. The shortfall in tax collections compared to projected budgetary targets set by parliament.
💡 Solution & Explanation
Fiscal deficit measures the total borrowing requirements of the government from all sources during a financial year, calculated as total expenditure minus revenue receipts and non-debt capital receipts. Financing the fiscal deficit through domestic market borrowings or external loans can exert upward pressure on interest rates and crowd out private investment if not managed prudently under the Fiscal Responsibility and Budget Management Act targets. Revenue deficit focuses strictly on operational revenue accounts, whereas primary deficit strips out interest payments on past debt. Prudent fiscal management aims to contain fiscal deficits within sustainable limits.
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