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The year’s fiscal deficit target seems achievable despite a spike in February
The Centre’s fiscal deficit, or the gap between the Union Government’s receipts and expenditure, has widened sharply from about ₹11 lakh crore by January to ₹15 lakh crore at the end of February.
This represents the deficit moving up from 63.6% of the revised target of ₹17.3 lakh crore to 86.5% within 29 days.
A fiscal deficit is essentially a situation where a government spends more money than it earns in a given year.
How's it calculated?
It's the difference between the government's total revenue (taxes, fees, etc.).
Its total expenditure (on things like infrastructure, social programs, military).
We can express it as a number (the amount of money) or as a percentage of the country's Gross Domestic Product (GDP), which is the total value of goods and services produced.
Why does it happen?
There are a couple of reasons:
Higher spending: The government might need to spend more on things like social programs during a recession or on public projects like building bridges.
Lower revenue: Economic downturns can lead to lower tax income for the government.
Is it always bad?
Not necessarily.
Sometimes, a little deficit spending can be a good thing, especially if the money is invested in projects that will boost the economy in the long run.
However, a very high or persistent deficit can lead to problems like inflation and higher debt.
Fiscal Deficit = Total Expenditure – Total Revenue
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