Question 1 · 10 marks · 126 words written
Opening · a definition
Fiscal deficit refers to the net borrowings taken by the government to finance its expenditure - revenue and capital.
Currently it is around 5.8% and the government aims to reduce it to 5.3% (Budget FY25).
Factors contributing to the high fiscal deficit
Body · points and prose
i) Low tax revenue collection by the government - direct and indirect tax.
ii) Low tax base - activities such as agriculture not included.
iii) High revenue expenditure of the government. (Eg) High pensions and salaries for defence.
iv) High capital expenditure - increased from 12% to 20% of total expenditure.
v) Subsidies - food, fuel and fertilisers along with expenditure in welfare schemes. (Eg. PM Awas Yojana).
Close · a summary
Government measures such as faceless tax appeals, GST, New Pension scheme are aimed at fiscal consolidation.