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Vaishnavi is a Financial Content Writer at LoansJagat. She holds a B.Sc. and an M.Sc. She has experience in writing SEO-focused content across finance, digital marketing, education, and Ayurveda. Before joining LoansJagat, she worked with digital marketing agencies serving fintech clients and quick-commerce brands like Zepto and blinkit. At LoansJagat, Vaishnavi writes on banking, loans, personal finance, and insurance. Her work involves researching financial topics, understanding user search intent, and creating content that is clear and accurate. She has experience in SEO content writing, keyword research, content optimisation, and AEO. She enjoys simplifying complex topics into practical information that readers can easily understand and use. She believes that well-researched and reliable content plays an important role in helping people make informed financial decisions.
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Government earns money on one side and spend it on other for economic development. These spendings are good upto particular limit because these spendings are going towards infrastructure which creates jobs and government long-term assets. But the problem arises when these spendings are much more than the earnings. This situation is called fiscal deficit. In this article we are going to know everything about the fiscal deficit.
When the government’s expenditure is more than the money that is earned, this condition is called a fiscal deficit.
Actually, the condition is good for our country's economy up to a specific limit. Because when the government spends money on infrastructure, it creates jobs as well as long-term assets for the government. But the problem arises when the government spends more than the limit, but earnings are still on the lower side.
To finance the fiscal deficit, the government primarily borrows through the market by issuing government securities and through other debt receipts. But if the government does not control this condition, it can step into a debt trap. This can be dangerous for common people like you and me because the government can increase taxes.
Formula of fiscal deficit:
Fiscal Deficit = Total Expenditure – Total Non-Debt Receipts
Capital Expenditure: The money that is spent on assets like roads, bridges, railways, and infrastructure.
Non-debt capital receipts include recoveries of loans and other capital receipts that do not create debt liabilities.
Fiscal deficit occurs when a government's total expenditures are more than its income. This can be caused by the following reasons.
These were some examples of factors that contributed to the fiscal deficit.
For 2026-2027, April–June, India's deficit is ₹3.1 trillion. This is 18.2% of the government's full-year fiscal deficit target of ₹16.96 trillion. At the same time, government expenditure increased to ₹13.6 trillion, which was ₹12.2 trillion last year.
If you ask about the target, the government has decided the fiscal deficit target of 4.3% of GDP for FY 2026-27.
These numbers are for April–June, but these figures change throughout the year. Because government revenue and expenditure continue to evolve.
You may think about how the fiscal deficit is managed; let's understand.
Moreover, the government starts encouraging the private sector for Public-Private Partnerships (PPPs).
The fiscal deficit occurs when the government spends more money than its income. Fiscal deficit is important for the economy of the country. The government spends on infrastructure and development projects. But if this spending becomes excessive, it can affect the economy negatively. The government can increase taxes to fill the gap between income and spending.
Moreover, the government can take more loans, which can increase the pressure on the economy. When common people like you and me understand how fiscal deficit works, they can assess the government’s work.
We can not say whether it is good or bad. Fiscal deficit simply means the government spends more than its earnings. When the government spends on building long-term assets like bridges and ports, when there is a recession and the government spends, and when investing in human capital, that time fiscal deficit is good. But when the government uses debt for spending, that time is bad.
A fiscal deficit occurs when the government’s total expenditure exceeds its total non-debt receipts. so construction companies get its benefit. And the common people who want a job, can work on these projects. They get jobs. When the government spends on society welfare, the low income section also gets benefits.
If there is a higher fiscal deficit, it clearly means the gap between government expenditure and non-debt receipts is increased. Fiscal deficit’s impact depends on how additional spendings are used.
For 2026-2027, April–June, India's deficit is ₹3.1 trillion. This is 18.2% of the government's full-year fiscal deficit target of ₹16.96 trillion.
The government can finance the fiscal deficit with various methods. The government can borrow money from people and institutions via bonds. It can take money from big organisations like the world bank and IMF. Then the government can sell partial or full stakes in government-owned companies. These are more such options which the government hopes for.
GDP is gross domestic product which is the production of Goods and services in a particular economy in a particular time period. And the fiscal deficit is the difference between the income of the government and spendings. A high fiscal deficit is not good for the country.
Fiscal deficit is not always bad. Fiscal deficit is good if it is in limit. Then it can create jobs, boost economic growth, and build long-term assets.
Fiscal deficit is good only when it is in limit. If the government spends excessively, it can create a big problem like inflation and public debt.
Fiscal deficit can affect GDP both positively and negatively. If the government is spending more on infrastructure and welfare schemes, it creates jobs. But if the government is spending a lot, they have to borrow more money which increases the debt.
What is the formula for the fiscal deficit?
Fiscal Deficit = Total Expenditure – Total Non-Debt Receipts is the formula for fiscal deficit. It is used when the fiscal deficit is calculated.
