Question

Explain the fiscal deficit implications in detail.

Answer 1

Answer:

Fiscal deficit presents a more comprehensive view of budgetary imbalances. It is widely used as a budgetary tool for explaining and understanding the budgetary developments in India. Fiscal deficit refers to the excess of total expenditure over total receipts (excluding borrowings) during the given fiscal year.

Answer 2

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Definition: The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. ... Capital expenditure is incurred to create long-term assets such as factories, buildings and other development.

A greater deficit implies more borrowing by the government and the extent of the deficit indicates the amount of expense for which the money is borrowed. A huge disadvantage or implication of fiscal deficit is it may lead to a debt trap. Also, it may lead to unnecessary and wasteful expenditure by the government.

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