FISCAL DEFICIT (Syllabus: GS Paper 3– Economy)

Context: India's fiscal deficit for the first four months of this fiscal year through July stood at 6.06 lakh crore rupees, or 33.9% of annual estimates, government data showed.

• While the fiscal impact after the Indian government this week slashed LPG cylinder prices by Rs 200 per unit is seen to be limited as the move for now seems to only trim oil refiners’ profit margins, the rising clamor for the need to cut petrol and diesel prices may have an impact on budget gap.

Fiscal Deficit

• About: It is the gap between the government's overall income (including taxes and non-debt capital receipts) and its total expenditure excluding any borrowed funds.
• Causes of fiscal deficit arise: When government spending surpasses its income.

oIt represents the extent to which the government has spent more than its earnings, usually presented as a percentage of the GDP.

• The Fiscal Responsibility and Budget Management (FRBM) Act was established in 2003, aiming to establish targets for reducing fiscal deficits.
• Reduced fiscal deficit target: In Union Budget 2023-24, the fiscal deficit to GDP is pegged at 5.9% in FY24. This ratio has declined from 6.4% in 2022-23 (revised estimate) and 6.7% in 2021-22 (actual).