Fiscal deficit and its ideal target for India

Fiscal deficit is the difference between the total revenue and expenditure of government. The fiscal deficit generally occurs due to excess hike in the capital expenditure or due to deficit in revenue.

What are the constituents of total income of government?

There are two constituents and they are as follows:

  • Revenue receipts
  • Non- Tax revenues

Now, the revenue receipts contain custom tax, union territories taxes, income tax, GST, corporation tax and union excise duties.  

Government expenditure and its constituents-

The government expenditure also has certain elements like interest on capital expenditure, revenue expenditure and others. So, it is better to determine how to calculate pf amount before moving over the expenditure. Fiscal deficit is mentioned in the form percentage in GDP.  

According to the financial report of the current year the fiscal deficit is estimated about 7.03 lakh crore. This is to aim the aim the deficit at 3.3%. Based on the current pf contribution and pf percentage the government is planning to run a deficit which will be higher than 3.3 percent of gross domestic product (GDP). The reason behind this rate 2019-20 is the corporate tax cutting which impacted the revenue mobilization. The impact is estimated about 1.45 lakh crore.   

Fiscal deficit is good or bad- 

It can be said that fiscal deficit is good but it can turn out to be bad as well. However, this completely depends on the situation. When the fiscal deficit is high then it is beneficial for the economy. When the money is used to develop assets like roads, airports and highways then the economic growth can be easily noticed and it also opens new job opportunities. 

How government meets the fiscal deficit?

Generally, borrowings are the prime way to finance the deficit. There are many epf contribution and pf contribution rate which are also involved in this. Apart from this, the government also has, different sources from the borrowings can be done. Some of these sources are banks, overseas investors, public investors and public firms. 

Is it possible to meet the current fiscal?

According to the experts there are concerns regarding the current fiscal deficit. The clarity is missing in the revenue from the telecom sector and the investments are not taking place at the required rate. The provident fund calculation and epf interest rate are also getting affected from the same. 

People who are unaware about what is pf can go online and can also access the epf calculator for better information.  He government is falling short in collection of revenues and therefore all the departments are requested to cut short the expenditures. About twenty five percent expenditure reduction is demanded to main the current fiscal deficit of the country. 

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