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    Question

    With reference to ‘Fiscal Deficit’, consider the following statements:

    1.Fiscal deficit is calculated both in absolute terms and as a percentage of the country’s gross domestic product (GDP).

    2.A high deficit at times emerges if the government is spending on developmental works like construction of highways, ports, roads, airports.

    Which of the statements given above is/are correct?

    A 1 only Correct Answer Incorrect Answer
    B 2 only Correct Answer Incorrect Answer
    C Both 1 and 2 Correct Answer Incorrect Answer
    D Neither 1 nor 2 Correct Answer Incorrect Answer

    Solution

    The Centre’s fiscal deficit increased to Rs 4.51 lakh crore in April-June from Rs 2.10 lakh crore in April-May, according to data released by the Controller General of Accounts. Fiscal deficit is the difference between the government’s total expenditure and its total revenue (excluding borrowings). It is an indicator of the extent to which the government must borrow in order to finance its operations and is expressed as a percentage of the country’s Gross Domestic Product (GDP). Governments often resort to borrowing or other financing methods to cover the fiscal deficit. Fiscal deficit is calculated both in absolute terms and as a percentage of the country’s gross domestic product (GDP). A high Fiscal deficit at times emerges if the government is spending on developmental works like construction of highways, ports, roads, airports.

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