26 February 2013

What is fiscal deficit

Every year, the government spends money on a number of heads like social sector schemes, infrastructure, defense and interest payments. Similarly, it earns income mainly through revenue in the form of tax collections and also interest on its investments, dividends and profits from its stake in public sector companies, among other things. Typically, government expenditure exceeds its income, and the difference between the two is called the ‘fiscal deficit’...
The finance minister’s budget speech always mentions the fiscal deficit in the context of the Gross Domestic Product target, where GDP is a measure of the size of the whole economy. The fiscal deficit is expressed as a percentage of GDP.

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