In Today’s News:
- Fiscal deficit increases to Rs.9.1 lakh crore.
1. Fiscal deficit increases to Rs.9.1 lakh crore
The fiscal deficit has increased to Rs. 9.1 lakh crore which is in other words almost 115% of the budget target of Rs.7.96 lakh crore for 2020-2021.
Prelims GS – Economic Development
- A fiscal deficit is a shortfall in a government’s income compared with its spending.
- Fiscal Deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure.
- A fiscal deficit occurs when the government’s expenditure exceeds the receipts.
- Fiscal deficit= Total expenditure – Total receipts except borrowings.
- The Finance Minister identified the fiscal deficit for FY 2019-20 at 3.8%(RE) and pegged it at 3.5% (BE) for FY 2020-21 which is consistent with the government’s abiding commitment to macroeconomic stability as part of Medium Term Fiscal Policy cum Strategy Statement 2020-21.
- Section 4(2) of the FRBM Act provides for a trigger mechanism for a deviation from the estimated fiscal deficit on account of structural reforms in the economy with unanticipated fiscal implications.
- Therefore, a deviation of 0.5%, consistent with Section 4(3) of the FRBM Act, both for RE 2019-20 and BE 2020-21 was taken by the Government.
FRBM Act 2003:
- FRBM Act is an Act to provide for the responsibility of the Central Government to ensure inter-generational equity in fiscal management and long-term macro-economic stability by removing fiscal impediments in the effective conduct of monetary policy and prudential debt management consistent with fiscal sustainability through limits on the Central Government borrowings, debt and deficits, greater transparency in fiscal operations of the Central Government and conducting fiscal policy in a medium-term framework and for matters connected therewith or incidental thereto.
- “Fiscal deficit” means the excess of total disbursements, from the Consolidated Fund of India, excluding repayment of the debt, over total receipts into the Fund (excluding the debt receipts), during a financial year.
Click here to view the FRBM act.
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