Government shouldn’t rush to rein in fiscal deficit-NITI Aayog

News–NITI Aayog gas suggested that government should not rush to lower fiscal deficit. This would help economy and will provide a safety net to economy from new emerging variants. While the government has kept the fiscal deficit target for current financial year as 6.8 percent of GDP but it is targeting to lower it to 4.5 percent of GDP by year 2025-26. 

What is Fiscal deficit and what has been its trend 

A fiscal deficit is a shortfall in a government’s income compared with its spending. It is calculated as a percentage of gross domestic product (GDP). 

 Figure. Fiscal Deficit trends over the last Five years. 

Finance Ministry has also been prodding ministries and public sector companies to spend more but several ministries have not performed adequately on this aspect. 

What will be the effects of stepping up Capital expenditure? 

Stepping up Capital expenditure will boost demand for raw materials and create jobs which will strengthen economic recovery. 

Source– This post is based on the article “Government shouldn’t rush to rein in fiscal deficit-NITI Aayog” published in Times of India on 10th Dec 2021.