P.G DEPARTMENT OF PUBLIC ADMINISTRATION P.G. GOVT. COLLEGE FOR GIRLS

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Presentation transcript:

P.G DEPARTMENT OF PUBLIC ADMINISTRATION P.G. GOVT. COLLEGE FOR GIRLS B.A-II PAPER-B P.G DEPARTMENT OF PUBLIC ADMINISTRATION P.G. GOVT. COLLEGE FOR GIRLS SECTOR-11, CHANDIGARH FISCAL DEFICIT

FISCAL DEFICIT Difference between what the government spends and what it earns. It is expressed as a percentage of GDP.

Elements of Fiscal Deficit ---Revenue deficit- difference between government’s current (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)

TOTAL EXPENDITURE (REVENUE+CAPITAL) ___ FISCAL DEFICIT = TOTAL EXPENDITURE (REVENUE+CAPITAL) ___ (REVENUE RECEIPTS+NON-DEBT CAPITAL RECEIPTS)

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 funds

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