The fiscal deficit is expected to be much higher than the target in 2020-21, amid increased spending and declining revenues amid the Kovid-19 epidemic. Economic activities were severely affected due to the lockdown imposed to curb the spread of the epidemic. In such a situation, the economy is expected to decline by 7.7 percent in the current financial year. In the current financial year, the target was to limit the fiscal deficit to 3.5 percent.
Presenting the budget of 2021-22 in the Lok Sabha, the Finance Minister said that the government proposes to bring the fiscal deficit below 4.5 percent of GDP by 2025-26. The government takes loans from the market to meet the gap between expenditure and receipts, it is an indicator of fiscal deficit. In the fiscal year 2019-20, the fiscal deficit reached 4.6 percent due to lower revenue receipts. The Finance Minister said that the government plans to take a loan of Rs 80,000 crore in the remaining two months of the current financial year.
What is the financial loss
The difference between the total revenue and total expenditure of the government is called the financial deficit. If the expenditure of the government is more than the recovery of its revenue, then the government will have to take a loan to compensate it. Therefore, the government tries to keep the fiscal deficit to a minimum, so that it needs to borrow at least.