Fiscal Deficit

A fiscal deficit situation occurs when the government spends more than it earns. The excess of total expenditure ( revenue & capital ) over total receipts excluding borrowings. Calculated as a percentage of Gross Domestic Product.

To understand this, let's look at what Aman went through the pandemic .

Aman's mother got admitted in the hospital and had severe implicatons of covid on her health. Due to which she had a heart attack and needed Bypass Surgey which costed 2 lakhs.

Aman's Income was 3 Lakh rupees at that time. He spent Rs.2,00,00 for all his expenses. And had just Rs.1 Lakh with him. So he had to borrow another Rs. 1 Lakh from his friend, Namita.

In this case, Fiscal Deficit = Rs. 1,00,000 As he spent more than he earned, a fiscal deficit situation occured. He was in debt of Rs. 1 Lakh and had to return it back.

It gives the amount needed by the government to meet its expenses. Fiscal Deficit= Total expenditure of Govt.- Total Income of Govt. Expenditure : Allocation of Budget for various works and creation of assets. Income: Taxable and Non- Taxable incomes