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What is fiscal deficit in Budget?

Generally fiscal deficit occurs either due to revenue deficit or a major hike in capital expenditure.

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Last Updated: Jan 29, 2020, 07.30 PM IST
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Capital expenditure is incurred to create long-term assets, such as factories, buildings and such other developments.
Fiscal deficit is the difference between the total revenue and total expenditure of the government. It is an indication of total borrowings needed by the government to implement its Budget proposals for the year. Generally fiscal deficit occurs either due to revenue deficit or a major hike in capital expenditure. Capital expenditure is incurred to create long-term assets, such as factories, buildings and such other developments. The government had set itself a target of restricting the fiscal deficit to 3.3 per cent of GDP for the financial year ending March 2020.


  1. What is debt-to-GDP ratio?
    Debt-to-GDP ratio measures the relationship between government debt and the gross domestic product of the economy. A low debt-to-GDP ratio indicates that the economy has sufficient amount to pay back debt without incurring further debt. The ratio is an indicator of the health of the economy.
  2. What is DBT (Direct Benefit Transfer)
    DBT (Direct Benefit Transfer) is a scheme launched by the government to transfer the government benefits and subsidies under various social welfare schemes -- like LPG subsidy, MNREGA payments, old age pension, scholarships etc -- directly to the bank accounts of the beneficiaries. This was done to eliminate middle men because of which earlier there was a lot of leakage of money meant for various government welfare schemes for the economically weaker sections of society.
  3. What is MUDRA
    Micro Units Development and Refinance Agency (MUDRA) is an institution set up by the government to provide funding to non-corporate, non-farm sector income-generating activities of micro and small enterprises, whose credit needs are below Rs 10 lakh. Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has created three products, namely “Shishu”, “Kishore” and “Tarun” as per the stage of growth and funding needs of the beneficiary unit. Shishu covers loans up to Rs 50,000, while Kishore covers loan amount above Rs 50,000 and up to Rs 5,00,000. Tarun covers loans above Rs 5,00,000 and up to Rs 10,00,000.
  4. What is a cess?
    Cess is a type of tax that is charged or levied over and above the base tax liability of a taxpayer. For example, the government charges an education cess to generate additional revenue for funding primary, secondary and higher education. Other types of cess in India include road cess, education cess on imported goods, cess on crude petroleum oil etc.
  5. What is CPI Inflation
    Consumer price index (CPI) inflation is also known as retail inflation. It measures the changes in prices of a weighted average market basket of consumer goods and services purchased by households. India’s consumer price index (CPI)-based retail inflation spiked to hit a five-year high of 7.35 per cent in December 2019 due to costlier food products. The unexpected rise in inflation diminished the chances of RBI cutting interest rate at its next monetary policy review due early February.
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    The Pradhan Mantri Ujjwala Yojana is a central government scheme that aims to increase the adoption of LPG, especially in rural areas where the penetration is very low. Under the scheme launched in 2016, the government aims to distribute 5 crore LPG connections to families below the poverty line (BPL) with a support of Rs 1,600 per connection in three years.
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    Bharatmala Pariyojana is an umbrella programme for the highways sector that focuses on development of economic corridors, inter corridors and feeder routes, border and international connectivity roads, coastal and port connectivity roads and green-field expressways. A total of around 24,800 kms are being considered in Phase I of Bharatmala. In addition, Bharatmala Pariyojana phase -I also includes 10,000 kms of balance road works under NHDP, taking the total to 34,800 kms at an estimated cost of Rs 5,35,000 crore.

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