A fiscal deficit (FD) situation occurs when the government’s expenditure exceeds its income. It is the difference between the total expenditure of the government and its total revenue (excluding borrowings).
- Fiscal deficit is the gap between total expenditure and total income of the government.
- The fiscal deficit can arise either due to revenue expenses overshooting income or increase in capital expenditure.
- The fiscal deficit matters because it indicates the extent by which government spending exceeds its income and the total borrowings needed by it to fill this gap.
- A fiscal deficit is usually calculated and expressed as a percentage of a country’s Gross Domestic Product (GDP).
