4. Definition
Fiscal deficit is the difference between the
government's total expenditure and its total receipts
(excluding borrowing).
If the Government spends more than it earns we
have a situation which is called a fiscal deficit.
Fiscal deficit=government spending – government
revenue
5. Fiscal deficit as a percentage of GDP
GDP is the market value of all final goods and
services produced in a country in a year. The
GDP number includes both government
spending and private consumption of goods
and services.
7. FISCAL DEFICIT AS % OF TOTAL RECEIPTS
FISCAL DEFICIT AS % OF TOTAL RECEIPTS
73
68
62
47
33
23
FY07 FY08 FY09 FY10 FY11 FY12
8. Elements of fiscal deficit
Generally fiscal deficit takes place due to either revenue
deficit or a major hike in capital expenditure.
Revenue Capital
deficit expenditure
9. Revenue deficit
The difference between the government’s
current (or revenue) expenditure and total
current receipts (that is, excluding
borrowing)
Revenue deficit=budget revenue- actual net
revenue
10. EXAMPLE
Expected Actual
Revenue=Rs 100/- Revenue=Rs 90/-
Expenditure=Rs 75/- Expenditure=Rs 70/-
Net revenue=Rs 25/- Net revenue=Rs 20/-
REVENUE DEFICIT=RS 5/-
11. PERIOD REVENUE
DEFICIT
REVENUE 1985-2005 3.41
DEFICIT AS % VIII PLAN 2.8
OF GDP 1992-97
IX PLAN 1997- 3.95
2002
2002-03 4.44
2003-04 3.66
BE-BUDGET ESTIMATE 2004-05 2.53
2007-08 1.1
RE-REVENUE ESTIMATE 2008-09 4.5
2009-10 5.2
2010-11 3.3
2011-12(BE) 3.4
2011-12(RE) 4.4
2011-12(P) 4.3
2012-13(BE) 3.4
12. BE-BUDGET ESTIMATE
RE-REVISED ESTIMATE
REVENUE DEFICIT AS % OF GDP 5.2 P-PROVISIONAL
(in GDP)
4.44 4.5 4.4 4.3
3.95
3.66
3.41 3.3 3.4 3.4
2.8
2.53
1.1
13. 100
120
0
40
140
60
-20
20
80
1985-2005
VIII plan (1992-97)
IX plan (1997-02)
2002-03
2003-04
2004-05
2007-08
2008-09
2009-10
2010-11
2011-12(BE)
2011-12(RE)
2011-12(P)
2012-13(BE)
REVENUE DEFICIT AS % OF FISCAL DEFICIT
OF FISCAL DEFICIT
REVENUE DEFICIT AS %
14. Capital expenditure
Capital expenditure is the amount a company spends on
buying fixed assets, other than as part of acquisitions.
The capital Expenditure is the fund used by an
establishment to produce physical assets like
property, equipments or industrial buildings. Capital
expenditure is made by the establishment to consistently
maintain the operational activities.
15. CAPITAL EXPENDITURE OF CENTRE IN INDIA
PARTIC 2006-07 2007-08 2008-09 2009-10 2010- 2011-
ULARS 11(BE) 12(RE)
A.NON 36690.69 41819 47379.08 62383.11 70106.40 90132.17
DEVELO
PMENT
EXPEND
ITURE
B.DEVEL 22602.49 65122.14 30110.85 38302.33 66990.08 62051.95
OPMEN
T
EXPEND
ITURE
C.LOANS 8672.22 1385.55 6747.62 7034.35 16801.46 2130.22
AND
EXPEND
ITURE
SOURCE:MINISTRY108326.6 84237.55 107719.79
TOTAL( 67965.4 OF FINANCE,GOVT.OF INDIA 153897.94 154314.34
A+B+C) 9
Rs.in crores
16. CAPITAL EXPENDITURE OF CENTRE IN INDIA
180000
RS.IN CRORES
160000
140000
120000
NON DEVELOPMENT
100000 EXPENDIUTRE
80000 DEVELOPMENT
EXPENDITURE
60000 LOANS AND ADVANCES
40000
TOTAL
20000
0
RE-REVISED ESTIMATES
BE-BUDGET ESTIMATES
SOURCE:MINISTRY OF FINANCE,GOVT. OF INDIA
17. CURRENT SCENARIO
MONTH-WISE GROSS FISCAL DEFICIT OF CENTRAL
GOVERNMENT OF INDIA
YEA AP MA JUN JUL AU SEP OC NO DE JAN FEB MA
R RI Y E Y GU T V C RC
L ST H
2011- 746 560 3192. 6610 447 728. 2619 463 276 5392 586 1616
12 6.1 6.5 7 .0 7 7 .9 6 4.3 .1 3.8
2012- 671 743 4887
13 9.6 9.1 .3
RS.IN CRORES
18. MONTH-WISE GROSS FISCAL DEFICIT
OF CENTRAL GOVERNMENT OF INDIA
FISCAL DEFICIT
8000
7000
6000
5000
4000
3000
2000
1000
0
Apr/11
Jun/12
Oct/11
Mar/12
Jun/11
Aug/11
Nov/11
May/11
Apr/12
Jul/11
Sep/11
Feb/12
Dec/11
Jan/12
May/12
19. Causes of fiscal deficit
Payment of interest
Poor performance of public sector
Excessive government borrowings
Tax evasion
Increase in subsidies
Defence expenditure
20. Payment of interest
One of the major components of
government expenditure is the interest
payment both on domestic loans and
foreign loans. The government debt has
increased considerably over the years. This
has resulted in increased interest burden on
the government
21. Poor performance of public sector
Political interference
Inefficiency and corruption of management
Lack of professionalism
Surplus staff
22. Excessive government borrowings
The internal and external debt of the
government has increased considerably
during the past few decades. Due to the
debts; the government has to incur high
expenditure in form of interest
payments.
23. Tax evasion
Indian tax system is made up of
complex procedures with numerous
exemptions. Corruptions is rampant
at all levels, which leads to the fiscal
imbalance.
24. Increase in subsidies
The major subsidies provided by the Central Government of India have
increased over the years resulting in fiscal imbalance.
period Total central
government total central government
subsidies subsidies
2003-04 44323
200000
2004-05 45957 150000
2005-06 47522 100000
total centra
2006-07 57125 50000
governmen
0
2007-08 70066 subsidies
2008-09 129333
2009-10 141351
2010-11 164153
Rs in crore
2011-12 143570
25. Defence expenditure
The government has limited scope to reduce defence budget due to security problems
across the Indian borders
DEFENCE EXPENDITURE IN CRORES
180000
160000
140000
120000
100000
80000
60000 DEFENCE
40000 EXPENDITURE IN
20000
0 CRORES
2002-03
2007-08(BE)
2004-05
2008-09
2003-04(RE)
2009-10
2004-05(BE)
2005-06
2006-07(RE)
2010-11
2001-02
2011-12
SOURCE: ministry of defence,govt.of India
26. Consequences
Debt trap
Cut in capital expenditure
No increase in expenditure on education and health
High interest rates
27. Consequences
Fiscal imbalance may lead to inflation in the economy
High fiscal deficit may discourage foreign investment
in the country.
The government has to borrow additional funds to
solve fiscal deficit, which put extra burden on the
government for payment of interest.
28. Economic measures will help reduce
fiscal deficit: Pranab Mukherjee
PTI Nov 14, 2012, 03.09PM IST
29. NEW DELHI: President Pranab Mukherjee said
measures like allowing FDI in multi-brand retail
and civil aviation will help in reducing
government's fiscal deficit and putting the economy
back on high growth path.
"The government has recently unveiled several policy
measures designed to put economy back on high
growth trajectory," he said.
PTI Nov 14, 2012, 03.09PM IST
30. Govt plans to reduce fiscal deficit to
3% by 2017: FM
Government would rely on aadhaar
enabled direct cash transfers of subsidies
to eliminate duplication or falsification.
Immediate corrective steps
Introduction of the amended direct taxes
code (DTC) bill
PTI
Published: Monday, October 29, 2012, 12:40
