What is fiscal deficit ? It is total expenditure minus total revenue plus non debt creating capital assets.Thus it is nothing but the borrowings.
Every government strives to contain the fiscal deficit as it brings out a picture of how strong are the macroeconomic fundamentals of the economy of the country.The government of India has enacted Fiscal Responsibility and Budget management act.This act sets out the targets to be achieved by government for containing Fiscal and revenue deficit.
The government is required to run programmes and policies like MGNREGA for the socially disadvantaged section of the society. Government provides subsidy on Fertilizer,LPG which further increases the government spending on expenditure side.In order to invigorate the economy and increase the domestic spending government will have to increase the investment on infrastructure.The government will have to absorb the increase in salaries of the employees which is expected after the seventh pay commission.
Taking all these into consideration ,how will the government contain its fiscal deficit?What are the measures that needs to be taken by the government to contain the fiscal deficit and achieve fiscal consolidation.
Government has also set up a committee under former chairman of finance commission Shri Vijay Kelkar to suggest a road map for fiscal consolidation.