li    inan e in ndia         18.9
     fiscal deficit, a concept being used since the fiscal       year the government depended more on loans,
     1997–98 in India.9                                          the reasons behind higher or lower fiscal deficits,
           The situation of fiscal deficit indicates that the    whether the fiscal deficits have gone down due to
     government is spending beyond its means. To be              falling interest liabilities or some other factors, etc.
     more simple, we may say that the government is
     spending more than its income (though in practice           monetiseD Deficit
     all receipts of the government are not income.              The part of the fiscal deficit which was provided
     Basically, receipts are all forms of money accruing         by the RBI to the government in a particular year
     to the government, be it income or borrowings).             is Monetised Deficit, this is a new term adopted
           Fiscal deficit may be shown in the quantitative       since 1997–98 in India.11 This is shown in both
     form (i.e., the total currency value of the deficit)        the forms—in quantitative as well as a percentage
     or in the percentage form of the GDP for that               of the GDP for that particular financial year.
     particular year (percentage of GDP). In general,                 It is an innovation in the fiscal management
     the percentage form is used for domestic or                 which brings in more transparency in the
     international (i.e., comparative economics) studies
                                                                 government’s expenditure behaviour and also
     and analyses.
                                                                 in its capabilities concerning its dependence on
           India has been a country of not only regular but      market borrowings by the RBI. Basically, every
     higher fiscal deficits. Moreover, the composition           year both central and state governments in India
     of its fiscal deficit has been more prone to criticism      had been depending heavily on market borrowings
     (we will see this in the forthcoming sub-title              (internal) for its long-term capital requirements.
     ahead).
                                                                 Market borrowings of the government are done
                                                                 and managed by the RBI. Besides, the RBI is also
     PrimAry Deficit
                                                                 the primary customer for government securities—
     The fiscal deficit excluding the interest liabilities       yet another means of the government to raise
     for a year is the primary deficit, a term India             long-term capital. This has been a major area of
     started using since the fiscal 1997–98.10 It shows          fiscal concern in India. After the process of fiscal
     the fiscal deficit for the year in which the economy        consolidation was started by the government by
     had not to fulfil any interest payments on the
                                                                 the early 1990s, we see a visible improvement in
     different loans and liabilities which it is obliged
                                                                 this area. This term is itself arrived as the part of
     to—shown both in quantitative and percentage of
                                                                 fiscal reforms in India (we will visit the issue of
     GDP forms.
                                                                 fiscal consolidation in India in the coming pages).
           This is considered a very handy tool in the
     process of bringing in more transparency in the             Deficit AnD surPlus buDget
     government’s expenditure pattern. Any two years
     for example might be compared and so many                   When the budgetary proposals of a government
     things can be found out clearly such as, which              for a particular year proposes higher expenditures
                                                                 than the receipts, it is known as a deficit budget.
         9.   Raja J. Chelliah, ‘The meaning and significance of Opposite to this, if the budget proposes lesser
              pu lic deficit , p.     p.   . Also see inistry of
              Finance, Union Budget 1997–98.                       11.   Raja J. Chelliah, p. 389. Also see Ministry of Finance,
       10.    Ministry of Finance, Union Budget 1997–98.                 Union Budget 1997–98.