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Fiscal Deficit UPSC NOTE

 Why in news

  • 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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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Fiscal Deficit UPSC NOTE
Fiscal Deficit UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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