PG DEPARTMENT OF PUBLIC ADMINISTRATION PG GOVT COLLEGE FOR GIRLS SECTOR11 CHANDIGARH FISCAL DEFICIT FISCAL DEFICIT Difference between what the government spends and what it earns It is expressed as a percentage of GDP ID: 592318
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B.A-II PAPER-B
P.G
DEPARTMENT
OF PUBLIC ADMINISTRATION
P.G. GOVT. COLLEGE FOR GIRLS
SECTOR-11, CHANDIGARH
FISCAL DEFICITSlide2
FISCAL DEFICIT
Difference between what the government spends and what it earns.
It is expressed as a percentage of GDP.Slide3
Elements of Fiscal Deficit
---Revenue deficit- difference between government’s
c
urrent (or revenue) expenditure and total current receipts (that is, excluding borrowing)
---Capital expenditure
Fiscal Deficit can be financed by borrowing from RBI
(called money-creation)
and Market-borrowing
(from money market, i.e., mainly from banks)Slide4
FISCAL DEFICIT
=
TOTAL EXPENDITURE (REVENUE+CAPITAL)
___
(REVENUE RECEIPTS+NON-DEBT CAPITAL RECEIPTS)Slide5
Disadvantages of high Fiscal Deficit
More governmental borrowing
Government can lay greater claim on limited available funds
Pressure on interest rates, increase in cost of capital for
investors, pressure on overall return on investment
More non-development expenditure, no creation of
goods/services, inflation rises
Loss in credibility of country, withdrawal of foreign fundsSlide6
Indian Government’s policy on decreasing the fiscal deficit
-raising revenues
-reducing expenditure
Criticism:
GOI reduced investment in agriculture
GOI reduced expenditure on social sectors like
education, health and poverty alleviation