Every time economists sense India is or will be in trouble, the phrase fiscal deficit often pops up. While some experts believe that fiscal deficit is positive that helps the country grow, conservatives think otherwise, favoring a balanced budget policy. For example, economist John Maynard Keynes believed that deficits help countries climb out of economic recession. On the other hand, fiscal conservatives feel that governments should avoid deficits in favor of a balanced budget policy says Sachin Karpe. Fiscal deficit is the difference between the government’s expenditures and its revenues (excluding the money it’s borrowed). A country’s fiscal deficit is usually communicated as a percentage of its gross domestic product (GDP).
According to the data released by Controller General of Accounts (CGA) on Friday, the fiscal deficit during April-January 2013-14 worked out to be Rs 5.32 lakh crore or 101.6 per cent of the revised estimates. Fiscal deficit was sharply higher than the revised estimate, but revised estimate of 4.6% of GDP will be met as told by finance minister P Chidambaram. In the interim budget of February, the Congress-led government had revised the full-year fiscal deficit target to 5.25 trillion rupees says analyst Sachin Karpe. However the month of March might see some fiscal surplus.
According to Mr D K Joshi, the deficit was projected at 4.8 per cent of GDP and it stuck to this number, unless sharp corrections happened in March. Finance Minister P Chidambaram was optimistic and said that analysts all over the world look at fiscal deficit numbers while looking at stability of the economy. The economy is officially projected to grow 4.9 per cent in 2013-14 the second year in a row when the economy would expand below five per cent says Sachin Karpe. Government spending, inflation and lower revenue are among some of the main factors that lead to fiscal deficit. Like India, many developing countries are making an effort to resolve big fiscal deficits. On the bright side, for India, foreign investments and inflow of remittance from Indians living overseas has helped avoid very high deficits. Many economists consider the revenue deficit a more serious problem than the fiscal deficit because it means the government is borrowing to meet even its consumption expenditure. Fiscal deficit has been a key concern for credit rating agencies and RBI is likely to be on alert when it pays its debt says Mr. Karpe.
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