Central Government Fiscal Deficit

Introduction / Concept

Fiscal Deficit refers to a situation where government expenditure exceeds government revenue.
Simple definition: When the government spends more than it earns, the difference is called Fiscal Deficit.

Basic Concepts

(1) Government Revenue
Tax Revenue – Income Tax, GST
Non-Tax Revenue – Dividend, PSU income

(2) Government Expenditure
Salaries, subsidies, welfare schemes
Capital Expenditure – Infrastructure

Given Data – Key Information (2025-26)

Till February (11 months):
Fiscal Deficit = ₹12.53 lakh crore
2024-25 (same period) = ₹13.46 lakh crore
Thus, the deficit has decreased

Total Revenue = ₹27.91 lakh crore (82% of annual target)
Total Expenditure = ₹40.44 lakh crore (81.5% of annual target)

Capital Expenditure = ₹9.29 lakh crore (84.8%)
Used for roads, railways, infrastructure development
This is important for long-term growth

Net Tax Revenue = ₹21.45 lakh crore (80.2%)
GST and Income Tax collections are strong

Revenue Deficit:
January – ₹1.96 lakh crore
February – ₹3.89 lakh crore
Thus, it has increased

Cause → Effect

Causes:
Higher government spending (Infrastructure)
Welfare schemes
Defence expenditure

Effects:
Positive:
Economic growth increases
Employment generation

Negative:
Increase in public debt
Higher interest burden
Inflation

Current Economic Analysis

Fiscal deficit has decreased → Good fiscal management
Tax collection is high → Economy is stable
Capital expenditure is high → Growth-oriented budget

However, increase in revenue deficit is a concern

Static Link (Conceptual Link)

In macroeconomics:
Government expenditure
National income
Employment
All these are interrelated

Important Exam Points

Fiscal Deficit = Total Expenditure – Total Revenue (excluding borrowings)
Revenue Deficit = Revenue Expenditure – Revenue Receipts
Capital Expenditure → Growth driver
Higher deficit → Higher borrowing

Short Summary

In 2025-26, fiscal deficit has decreased
Tax revenue is strong
Increase in capital expenditure → Growth focus
However, rise in revenue deficit → Concern