Concept
• Fiscal deficit is the excess of total government expenditure over total non borrowing receipts
• It represents the amount the government needs to borrow in a financial year
Role in public finance
• Used to fund infrastructure, welfare schemes, and counter economic slowdowns
• Acts as a tool for demand management during downturns
Economic implications
• Leads to higher government borrowing
• Increases interest payments and future repayment obligations
Policy and governance relevance
• Indicator of fiscal discipline under FRBM framework
• Closely tracked by investors, rating agencies, and central banks
