Fiscal Deficit and its Trends in India after 1991

Fiscal deficit is defined as excess of government's total expenditures over the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits. A fiscal deficit is regarded by some as a positive economic event. For example, economist John Maynard Keynes believed that deficits help countries climb out of economic recession. On the other hand, fiscal conservatives feel that governments should avoid deficits in favour of a balanced budget policy. Fiscal deficit is an economic phenomenon where the government’s aggregate consumption outperforms the revenue generated. It is therefore the gap between government's aggregate receipts and aggregate consumption that gives the flag to the government about the aggregate acquiring necessities from all sources. Fiscal deficit have been at the cutting edge of macroeconomic conformity to the degree that deliberate and reasonable arrangement of measures have been utilized to respond to imbalances in the economy in both developing and developed nations Fiscal deficit measures the incremental amounts that governments are required to borrow in order to finance their budget shortfalls. The concept has gained significance in recent times with the IMF imposing strict restrictions and monitoring of the levels of fiscal deficit that economies can run if they have taken support or are going to request support from the IMF. India too started to monitor Fiscal Deficit after it had to solicit support from the IMF to resolve the balance of payment crisis of 1991. This study traces the major changes in the India’s fiscal policy since 1980-81 through the country’s balance of payments crisis of 1991, the post economic liberalisation and high growth period, the introduction of FRBM Act in 2003, adjustment to the global financial crisis of 2008 and the recent post-crisis changes to return to a path of fiscal consolidation The study found that from 1980-81 to 2002-03 the periods of crisis led to the burgeoning of the deficit to unsustainable levels and prompted the government to introduce and adopt economic reforms to ensure that the deficit stood at more reasonable levels. However since 2003-04 the government has been more proactive and has undertaken fiscal policy reforms to ensure a steady reduction in fiscal deficit as a percentage of GDP leading to a more resilient economy