Question

What are fiscal deficit and it's implications ? (6 marks)

Answer 1

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.

The implications of fiscal deficit are as follows:

1. Debt Trap

2.Inflation

3.Foreign dependence

hope it helps..

Answer 2

Answer:

Explanation

Implications: (i) Debt traps: Fiscal deficit is financed by borrowing. And borrowing creates problem of not only (a) payment of interest but also of (b) repayment of loans. As the government borrowing increases, its liability in future to repay loan amount along with interest thereon also increases.