Five things you must know about fiscal deficit

Here are five things you must know about fiscal deficit:

1. Fiscal deficit is the amount by which the central government receipts, excluding borrowings, fall short of expenditure. It is usually represented as a per cent of the GDP.

2. The deficit arising from a high capital expenditure can lead to revenues in the future. A revenue deficit, where even routine expenses cannot be fully met, is undesirable.

3. A fiscal deficit of 2-3% of the GDP is considered reasonable, while 5-6% of the GDP is considered to be high.

4. The government finances the fiscal deficit by borrowing from the market through issue of treasury bills and government securities.

5. Some governments recklessly print money, while others succeed in borrowing internationally to fund the deficit.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.