Deficit

The fiscal deficit is the difference between the government's total expenditure and its total receipts (excluding borrowing). The elements of the fiscal deficit are (a) the revenue deficit, which is the difference between the government’s current (or revenue) expenditure and total current receipts (that is, excluding borrowing) and (b) capital expenditure. The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market, that is mainly from banks).When a government's total expenditures exceed the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits. or A fiscal deficit is regarded by some as a positive economic event. For example, economist John Maynard Keynes believed that deficits help countries climb out of economic recession. On the other hand, fiscal conservatives feel that governments should avoid deficits in favor of a balanced budget policy.

A deficit is the amount by which a sum falls short of some reference amount.

In economics, a deficit is a shortfall in revenue; in more specific cases it may refer to:

• Government budget deficit
  • Deficit spending
  • Primary deficit, the pure deficit derived after deducting the interest payments
  • Structural and cyclical deficit, parts of the public sector deficit
• Income deficit, the difference between family income and the poverty threshold
• Trade deficit, when the value of imports exceed the value of exports
• Balance of payments deficit, when the balance of payments is negative

Deficit may also refer to:

• Attention deficit hyperactivity disorder, a developmental disorder characterized by attentional problems and hyperactivity
• Cognitive deficit, any characteristic that acts as a barrier to cognitive performance
• Defect (geometry), angular deficit
• Déficit, a 2007 Mexican film by Gael García Bernal

Impact of the Government's Policy of Decreasing the Fiscal Deficit: Logically, there are two ways in which the fiscal deficit can be reduced — by raising revenues or by reducing expenditure. However given the character of our State and the constraints of a liberalized economy, the government has not increased revenues. In fact, in budget after budget the government has actually given away tax cuts to the rich. Even when it has tried to raise revenues, it has been through counterproductive means like disinvestment.

The main impact of the policy of reduced fiscal deficits has therefore been on the government's expenditure. This has had a number of effects. First, government investment in sectors such as agriculture has been cut. Secondly, expenditure on social sectors like education, health and poverty alleviation has been reduced leading to greater hardship for the poor already bearing the brunt of liberalization. Perhaps most importantly, in an economy going through a recession the government is not allowed to play any role in boosting demand.