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
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.
Market borrowings of the government are done
and managed by the RBI. Besides, the RBI is also
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
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.