Economics
What is Fiscal Deficit?
Fiscal deficit is the gap between what the government spends and what it earns from taxes and non-debt revenues, showing how much the government needs to borrow.
Formula
Fiscal Deficit = Total Expenditure - Total Revenue (excluding borrowings)
How to Interpret
High fiscal deficit (>5% of GDP) may lead to higher interest rates, crowding out private investment. Markets react to budget deficit announcements (US debt-ceiling debates and India Union Budget moves both move bonds and equities).
Typical Ranges
US: federal deficit has run 5–7% of GDP recently (concerns about long-term debt sustainability). Or international markets like India: target below 4.5% of GDP. Lower is fiscally healthier.