‘The fiscal deficit gives the borrowing requirement of the government’. Elucidate.

Question

Philoid · Accepted Answer

Fiscal deficit is the excess of total expenditure over total receipt. So the fiscal deficit estimates the borrowing requirements of the government from all the sources during the financial year. It is an estimate of borrowings by the government.

The greater will be the fiscal deficit the more will be the borrowings by the government. Higher borrowings imply a higher burden of repayment of loan and of interest on future generation.

Fiscal Deficit = Total expenditure - Total receipts (excluding borrowings)