New Delhi: One of the most keenly watched numbers in any budget is the fiscal deficit, both as an absolute number and also as a percentage of a country’s gross domestic product (GDP). Fiscal Deficit reflects the fiscal health of a government; a high fiscal deficit reflects poor health of the government’s finances whereas a smaller fiscal deficit or fiscal surplus indicates the sound fiscal health of a government.
What is the fiscal deficit in the Union Budget?
As per the official terminology, Fiscal Deficit (FD) is the adverse fiscal balance which is a difference between the Revenue Receipts plus Non-Debt Capital Receipts (NDCR).
For a student of economics, the amount of fiscal deficit reflects the difference between the total expenditure of a government and its total non-debt receipts. This is the amount that a government needs to finance by borrowing. In other words, the fiscal deficit reflects the total borrowing requirement of the government in a financial year.
Borrowing requirements exceed 40% of the Union Budget
For example, for the financial year 2021-22, the total expenditure of the Union government was Rs 37.94 lakh crore as per the budget data. However, the government borrowed more than 15.84 lakh crore in that year to meet the shortfall between the total expenditure that year and the total non-debt receipts of the government.
It was a huge sum as nearly 42 percent of the Union government’s total expenditure of Rs 37.94 lakh crore in that year was financed through borrowings. As a percent of the GDP, this was 6.7 percent of India’s gross domestic production that year.
Similarly, in the last financial year (FY 2022-23), the fiscal deficit, as a percentage of the country’s GDP, was again above 6 percent as per the revised estimate.
The budget data showed that the Union government’s total expenditure was estimated to be more than Rs 41.87 lakh crore as per the revised estimate while the fiscal deficit, or the total borrowing requirement of the Union government for the financial year was estimated at over Rs 17.55 lakh crore.
The budget data showed that the Union government was required to borrow nearly 42 percent of its total expenditure for the last financial year. According to the data presented by the finance minister Nirmala Sitharaman, the fiscal deficit for the current financial year is expected to decline marginally below the 6 percent of the country’s GDP.
The budget data showed that as per the budget estimates, presented in February last year, the fiscal deficit is expected to hit a record 17.87 lakh crore in the fiscal year ending on March 31 this year.
As a percentage of the GDP, the estimated fiscal deficit for the current financial year is expected to be 5.9 percent of the GDP and as a percentage of the Union government’s total expenditure for the current financial year, which has been estimated at over Rs 45 lakh crore, it is expected to be slightly below the 40 percent of the total budgeted expenditure for this fiscal.
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