📘What is a fiscal deficit? Analyze the implications of a high fiscal deficit on the Indian economy. Suggest measures to control it.
📘 GS Paper 3 – Indian Economy ❓ Question: "What is a fiscal deficit? Analyze the implications of a high fiscal deficit on the Indian economy. Suggest measures to control it." "राजकोषीय घाटा क्या होता है? भारतीय अर्थव्यवस्था पर उच्च राजकोषीय घाटे के प्रभावों का विश्लेषण कीजिए। इसे नियंत्रित करने के उपाय सुझाइए।" ✍️ Answer in English (UPSC Mains Format) Introduction Fiscal deficit refers to the difference between the government’s total expenditure and its total revenue (excluding borrowings). It reflects the extent to which the government is spending beyond its means and is an important indicator of macroeconomic health. Formula: Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-Debt Capital Receipts) Body 1. Implications of High Fiscal Deficit Inflationary Pressure : Excessive borrowing can lead to increased money supply and inflation. Crowding Out of Private Investment : Government borrowing raises interest rates, reducing private secto...