Economics forum : Deficit Budget

What is deficit budget?

The amount by which a government, company, or individual's spending exceeds its income over a particular period of time is known as deficit budget.

Why is it important for India?

India has always had a deficit budget.

Where does the government earn its income?

Direct taxes (income tax) , Indirect tax (excise,custom duty)

What are the government's major expenses?

Salaries of the government employees , infrastructure projects and a major part of the expenses is the interest that the government pays on the loan it takes.

How is this related to deficit budgeting?

The government's expenses are more than its income.To bridge that gap between the expense and the income the government takes loans.Earlier it used to take loans from various countries ,the IMF and the World Bank.However in the recent years it has taken loans from the citizens of India in terms of the various government bonds etc.

Hence the major expenditure of the government is the interest it pays these countries and the people from whom it has borrowed.

This is a vicious cycle which would never end unless either the income increases or the governement expenditure decreases.This decrease in expenditure can happen only if there is a reduction in the money lost in the system through corruption.

The next post on Economics form would look at this corruption issue in detail.

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