FICAL DEFICIT IN

INDIA
BY
NATRAJ V
ANUPAM TIWARI
RAJESH KUMAR DASH
SAJID KARBHARI
MOHIT SHARMA

AGENDA

Definition
Fiscal deficit as a percentage of GDP
Elements of fiscal deficit
Causes
Consequences
Reducing Fiscal deficit
Conclusion

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DEFINITION

Fiscal deficit is the difference between the governments

total expenditure and its total receipts(excluding
borrowing).
If the Government spends more than it earns we have a
situation which called a fiscal deficit.
Fiscal deficit =government spending government
revenue

FISCAL DEFICIT AS A PERCENTAGE

OF GDP

GDP is the market value of all final goods and

services produced in a country in a year. The GDP
number includes both government spending and
private consumption of goods and services.

FISCAL DEFICIT
Series 1

Series 1

ELEMENTS OF FISCAL DEFICIT

Generally Fiscal deficit takes place due to either revenue
deficit or a major hike in capital expenditure

Revenue
deficit

Capital
Expenditure

REVENUE DEFICIT

The difference between governments current (or

revenue) expenditure and current receipts
(excluding borrowing)
Revenue deficit=budget revenue Actual net
revenue

EXAMPLE

CAPITAL EXPENDITURE
Capital expenditure is the fund used by the
government to produce physical asset like road,
building
Repayment of loan is also a capital expenditure
because it reduces liability

CAUSES OF FISCAL DEFICIT

Payment of interest
Poor performance of public sector
Excessive government borrowing
Tax evasion
Subsidies
Defence Expenditure

PAYMENT OF INTEREST

One of the major component of government

expenditure is the interest payment for both
domestic loans and foreign loans. The
government debt has increased considerably over
the year. This has resulted in increased interest
burden on the government

POOR PERFORMANCE OF PUBLIC SECTOR

Political interference
Inefficiency and corruption of management
Lack of professionalism
Surplus staff

EXCESSIVE GOVERNMENT
BORROWINGS
The internal and external debt of the
government has increased considerably during
the past few decades. Due to the debts; the
government has to incur high expenditure in the
form of interest payment

TAX EVASION

Indian tax system is made up of

complex procedures with numerous
exemption. Corruptions is rampant at all
levels, which lead to the fiscal
imbalances

SUBSIDIES
Subsidies provided on LPG
Subsidies provided on petroleum
products
Subsidies on food and agriculture

DEFENCE EXPENDITURE

Government has limited scope to

reduce defense budget due to security
problem across the Indian Border

CONSEQUENCES
Fiscal imbalance may lead to inflation
in the economy
High fiscal deficit may discourage
foreign investment in the country
The Government has to borrow
additional fund to solve fiscal deficit,
which put extra burden on the
government for payment of interest.

CONSEQUENCES

Debt trap
Cut in capital expenditure
No increase in expenditure on
education and health
High interest rate

THANK YOU