FISCAL DEFICIT : THE ELEPHANT IN THE ROOM THAT NO ONE WANTS TO TALK ABOUT

 

A fiscal deficit occurs when a governments total expenditure exceed the revenue it generates, excluding money from borrowings. This deficit is usually financed through the issuance of government bonds, which are sold to investors. The fiscal deficit is an important measure of government's financial health and sustainability.

There are several factors that can contribute to a fiscal deficit. One common cause is a decline in government revenue, which can be caused by a downturn in the economy or a decrease in tax collections. Another factor that can contribute to fiscal deficit an increase in government increases its spending on social programs or infrastructure projects.

IN INDIA

The Indian Government has traditionally struggled with high levels of fiscal deficit, which has contributed to the country's high levels of public debt.

FACTORS RESPONSIBLE

• Large growing population.
• Pressure on government to provide services and support to citizen's.
• India's economic growth is accompanied by a rise in government spending on infrastructure, social programs, and other initiatives.

Indian government has taken a number of steps to try to reduce its fiscal deficit in recent years. These have included measures such as increasing taxes , reducing subsidies, and cutting back on certain type of spending. In addition government implemented a number of economic reforms aimed at improving the country's overall financial health and sustainability. Despite these efforts, the fiscal deficit in India remains as a concern , and the government continues to face challenges in bringing it under control.

HOW TO OVERCOME FISCAL DEFICIT

• Reduce spending : Government can reduce their fiscal deficits by cutting back on certain types spending such as discretionary spending or subsidies.
• Increase revenue:  Government can rise their revenue by measures like rising tax, increasing fee for government services, or improving tax compliance.
• Implement economic reforms : Such as deregulation, and privatisation.

It is important for governments to carefully manage their fiscal deficits and to develop sustainable long term strategies for reducing them. Persistent high levels of fiscal deficit can lead to higher levels of public debt, which can have negative consequences for a country's economy.