Fiscal deficit at 36.5% of full-year target; here's what it means

India's fiscal deficit widened to Rs 5.73 lakh crore in the April-September period from Rs 4.74 lakh crore in the corresponding six months a year ago, official data showed on Friday. A fiscal deficit is the shortfall between a government's revenue and its expenses in a financial year.

In the first six months of the financial year, the country's fiscal deficit stood at 36.5 per cent of the full-year target of Rs 15.69 lakh crore.

Now, what does that mean? In the April-September period, the government’s total spending minus its income -- or fiscal deficit -- has reached 36.5 per cent of what it planned for the entire year. In other words, the government has borrowed about Rs 36.5 out of every Rs 100 it planned to borrow for the year.

Add Zee Business as a Preferred Source

Now let's get to the details of the semi-annual update:

• Expenditure in the six-month period increased to Rs 23.03 lakh crore from Rs 21.11 lakh crore a year ago, and revenue grew to Rs 17.30 lakh crore from Rs 16.37 lakh crore, the data showed.
• Capital expenditure increased to Rs 5.80 lakh crore from Rs 4.51 lakh crore a year ago.
• While gross tax revenue increased 2.9 per cent to Rs 18.65 lakh crore, non-tax revenue increased 30.5 per cent to Rs 4.66 lakh crore.
• In September, the exchequer's revenue increased 6.7 per cent to Rs 4.47 lakh crore while spending decreased 8.1 per cent to Rs 4.22 lakh crore.
• During the month, capex jumped 30.7 per cent to Rs 1.49 lakh crore, gross tax revenue increased 8.3 per cent to Rs 5.21 lakh crore and non-tax revenue grew 13.2 per cent to Rs 25,700 crore, according to the official data.

ALSO READ: India aims to boost global rice export share from 40% to 60%, says IREF President

Here are answers to a few frequently asked questions (FAQs) about the subject:

What exactly is a fiscal deficit?

A fiscal deficit occurs when a government spends more money than what it earns.

Simply put, it’s the gap between income and expenses -- the amount the government needs to borrow to meet its commitments.

Why does the fiscal deficit matter?

It shows how healthy a government’s finances are.

A moderate fiscal deficit can help fund development projects, create jobs and boost growth.

However, a larger deficit may lead to more borrowing, which can push up inflation and interest rates over time.

How is the fiscal deficit gauged?

It is often interpreted as a percentage of the country’s GDP. This gives context as to how big the shortfall is compared to the overall size of the economy.

For instance, a fiscal deficit that is 3.0 per cent of GDP means that the government is borrowing 3.0 per cent of the total value of all goods and services produced in the country.

Is a lower fiscal deficit always better?

Not necessarily. While a lower deficit shows financial discipline, too little spending can also slow growth.

The goal is to strike a balance -- enough spending to support the economy, but not so much that it builds unsustainable debt.