Fiscal Deficit Concept

Source: The Hindu
GS III: Economics; Prelims

Overview

1. News in Brief
2. Fiscal Deficit
3. Fiscal Consolidation

Why in the News?

The government’s fiscal deficit at the end of October stood at 28.03 lakh crore, or 45% of the full-year budget estimate, according to data released by the Controller General of Accounts on Thursday.

News in Brief

• The government’s fiscal deficit at the end of October stood at 28.03 lakh crore, or 45% of the full-year budget estimate, according to data released by the Controller General of Accounts on Thursday.
• The fiscal deficit the difference between expenditure and revenue was at 18.03 lakh crore during the April-October period of 2023-24.
• In the corresponding period last year, the deficit was at 45.6% of the budget estimates for 2022-23.
• For 2023-24, the fiscal deficit of the government is estimated to be at 717.86 lakh crore or 5.9% of the GDP.
• The Government of India received Rs.15.9 lakh crore up to October 2023 comprising 13.01 lakh crore tax revenue, 2.65 lakh crore of non-tax revenue and 22,990 crore of non-debt capital receipts.
• Non-debt capital receipts consist of recovery of loans (14,990 crore) and miscellaneous capital receipts (78,000 crore).
• As per CGA data, total expenditure was at 123.94 lakh crore (53% of corresponding BE 2023-24) during April-October 2023.

Fiscal Deficit

Fiscal Deficit = Total expenditure (Revenue expenditure + Capital expenditure) – Total receipts other than borrowings/total income (Revenue receipts + Non-debt creating capital receipts)

• The shortfall in the income of a government as compared to its expenditure. 
  • Expressed as a percentage of its GDP.
  • Fiscal Deficit of the government will be equal to its market borrowings (G-Sec & TBills).

The fiscal Deficit can be reduced by Fiscal Consolidation.

Fiscal Consolidation

What is Fiscal Consolidation?

Policies implemented by government authority to reduce debt accumulation and minimize deficits. This is done by central or State authority.

• Reducing government spending
  • Reducing unnecessary expenses
  • Enhancing efficiency in public service delivery
  • Making government programs and projects cost-effective
• Increasing government revenue
  • Implementing tax reforms
  • Broadening the tax base
  • Improving tax collection efficiency
  • Closing loopholes in the tax system
  • Disinvestment and selling assets

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