Fiscal Deficit

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How the govt plans to meet the fiscal deficit target

Changing fiscal architecture at state level

Phased pension hike likely to meet fiscal deficit target

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	A country&rsquo;s fiscal balance is measured by its government&rsquo;s revenue vis-a-vis its expenditure in a given financial year. Fiscal deficit, the condition when the expenditure of the government exceeds its revenue in a year, is the difference between the two. Fiscal deficit is calculated both in absolute terms and as a percentage of the country&rsquo;s gross domestic product (GDP).</div>
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	The fiscal deficit of a country is calculated as a percentage of its GDP or simply as the total money spent by the government in excess of its income. In either case, the income figure includes only taxes and other revenues and excludes money borrowed to make up the shortfall.</div>
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	In her maiden Union Budget, Finance Minister Nirmala Sitharaman had revised the government&rsquo;s fiscal deficit target for 2019-20 to 3.3 per cent of GDP, 10 basis points lower than the target for the previous financial year.</div>
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	<strong>How is fiscal deficit calculated?</strong></div>
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	The fiscal deficit, in mathematical terms, is [total revenue generated &mdash; total expenditure]. The total revenue is the sum of revenue receipts, recovery of loans and other receipts of the government.</div>
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	While most countries continue to project a deficit in their economies, a surplus is a rare phenomenon. A high deficit at times also emerges if the government is spending on developmental works like construction of highways, ports, roads, airports which will later generate revenue for the government.</div>
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	<strong>What are components of the fiscal deficit calculation?</strong></div>
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	The fiscal deficit calculations are based on two components &mdash; income and expenditure.</div>
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	Income component: The income component is made of two variables, revenue generated from taxes levied by the Centre and the income generated from non-tax variables. The taxable income consists of the amount generated from corporation tax, income tax, Customs duties, excise duties, GST, among others. Meanwhile, the non-taxable income comes from external grants, interest receipts, dividends and profits, receipts from Union Territories, among others.</div>
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	Expenditure component: The government in its Budget allocates funds for several works, including payments of salaries, pensions, emoluments, creation of assets, funds for infrastructure, development, health and numerous other sectors that form the expenditure component.</div>
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	<strong>How is fiscal deficit balanced out?</strong></div>
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	While a rising deficit is a challenge for the government in the long term, to balance it out in short-term macroeconomics, the government looks at market borrowings by issuing bonds and selling them in through banks. Banks buy these bonds with currency deposits and then sell them to investors. Government bonds are considered an extremely safe investment instrument, so the interest rate paid on loans to the government represents risk-free investment.</div>
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	The government also sees a deficit situation as an opportunity to expand policies and schemes, including welfare programmes, without having to raise taxes or cut spending in the Budget.</div>

RELATED BUDGET TERMS

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What is Fiscal Deficit, Fiscal Deficit News, Budget 2020 News, Fiscal Deficit Calculation

What is Fiscal Deficit

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	The Goods and Services Tax (GST) is a uniform indirect tax levied on goods and services across the country. GST, as an umbrella tax, replaced central taxes like central excise, service tax, additional duties of excise &amp; customs, special additional duty of customs, besides cesses and surcharges, on supply of goods and services.</div>
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	<strong>Central GST and State GST</strong></div>
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	CGST is levied on intrastate supplies by the central government and SGST is levied on intrastate supplies by respective state governments.&nbsp;</div>
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	<strong>Integrated GST</strong></div>
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	IGST is levied on interstate supplies by the Centre (equal to CGST + SGST combined on supplies made within the state).</div>
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	Any supply of goods or services or both on interstate basis typically attracts IGST on the consideration thereof.</div>
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	<strong>Key features of GST</strong></div>
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	* GST envisages all transactions and processes to be done only through the electronic mode, to achieve a non-intrusive administration. This minimises the taxpayer&#39;s physical interaction with tax officials.</div>
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	* GST provides for the facility of auto-populated monthly returns and annual return.</div>
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	* It also facilitates taxpayers by prescribing grant of refund within 60 days, and provisional release of 90 per cent refund to exporters within 7 days.</div>
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	* Further facilitation measures include interest payment if refund is not sanctioned in time, and refund to be directly credited to bank accounts.</div>
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	* Comprehensive transitional provisions for ensuring smooth transition of existing taxpayers to GST regime, credit for available stocks, etc.</div>
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	* Other provisions include system of GST compliance rating, etc.</div>
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	* Anti-profiteering provisions for protection of consumer rights: Any benefit by way of reduction in rate of tax or increase in input tax credit arising due to introduction of GST are passed on to customers (through reduction in sale price) by way of commensurate reduction in prices.&nbsp;</div>
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	* Under the GST regime, exports are zero-rated in entirety, unlike the earlier system where refund of some of the taxes did not take place due to fragmented nature of indirect taxes between the Centre and states.</div>
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	* GST is largely technology-driven and reduces the human interface to a great extent</div>
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	* GST is believed to have improved ease of doing business in India.</div>
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What is Goods and Services Tax, GST Meaning, GST Definition, Goods and Services Tax News

Goods and Services Tax

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	Inflation can be defined as a persistent rise in the general price of goods and services of common or daily use &mdash; such as clothing, food, fuel, transport, etc &mdash; which results in an increase in the cost of living.</div>
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	Inflation is the measure of change in average price of services and commodities, done at regular intervals. It indicates a decrease in the purchasing power of a unit of a nation&rsquo;s currency as the products and services get more expensive. Basically, inflation is the difference between aggregate demand and aggregate supply of goods and services. When aggregate demand exceeds the supply of goods at current prices, there is a rise in the price level.</div>
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	A certain level of inflation is required in the economy to ensure that expenditure is promoted and money hoarding through savings is discouraged.</div>
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	<strong>How is inflation measured?</strong></div>
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	In India, there are two main sets of inflation indices to measure changes in price levels &mdash; Consumer Price Index (CPI) and Wholesale Price Index (WPI). These indices measure changes at the retail and wholesale price levels, respectively. CPI tracks any shift in retail prices of essential and daily goods and services consumed by households across the country. In short, it captures changes in price level at the consumer level.</div>
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	WPI, on the other hand, is the average change in the price of commodities at the wholesale level. It considers the price of goods traded among corporations, not goods purchased by consumers. The aim of WPI is to monitor price drifts that reflect demand and supply in manufacturing, industry and construction.&nbsp;</div>
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Page 54 - Latest Updates on Fiscal Deficit

Fiscal deficit at end-Feb exceeds revised estimate

State govts likely to run wider fiscal deficit in FY17: HSBC

Govt sticking to fiscal deficit target a big relief: Economists

How the govt plans to meet the fiscal deficit target

Changing fiscal architecture at state level

Phased pension hike likely to meet fiscal deficit target