The objective of the study was to analyze the current trends in India's fiscal deficit and Gross Domestic product and also to study the impact of increasing fiscal deficit on the various components of Gross Domestic Product.
The project was a mixture of theoretical as well as practical knowledge. Secondary data required was for the project was collected from various websites and books of reputed authors. The project commenced from sorting the data and arranging them in perfect order. A Deficit is the amount by which a particular sum of money falls short of the required amount of money.
Fiscal deficit is an economic funda, where the Government's total expenditure exceeds the revenue generated. It is the difference between the Government's total receipts (excluding borrowing) and total expenditure. It gives the signal to the government regarding the total borrowing requirements from all sources. An increase in fiscal deficit means that the government is not able to meet its total expenditure out of its total receipts.
The Gross Domestic Product ( GDP ) is the amount of goods and services produced in a year in a country. It is the market value of all final goods and services made within the borders of a country in a year.
GDP = C + I + G + (X-M)
Where,
C = Private Consumption
It is the largest GDP component in the economy, consisting of private household final consumption expenditure in the economy. These personal expenditures fall under one of the following categories: durable goods and non-durable goods, and services. Examples include food, rent, jewelry, and medical expenses but do not include the purchase of new housing.
I = Gross Investment
It includes business investment in equipments and does not include exchanges of existing assets. Examples include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. Buying financial products is classed as 'saving', as opposed to investment . This avoids double-counting, if one buys shares in a company, and the company uses the money received to buy plant, equipment, etc., the amount will be counted toward GDP when the company spends the money on those things.
G = Government Spending
It is the sum of government expenditures on final goods and services. It includes salaries of public sector employees, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments.
X = Exports
It represents gross exports. GDP considers the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added.
M = Imports
It represents gross imports. Imports are subtracted since imported goods will be included in the terms G , I , or C , and must be deducted to avoid including foreign supply as domestic.
Due to global financial crisis the Government of India announced the first stimulus package on 7 th December 2008. Since the Government has announced three more stimulus packages as of 2009. These measures were taken to support the micro, small and medium sector enterprises. The priority was to re-assure the people of the country of the stability of the financial system in general and also of the safety of bank deposits in particular. For this steps were taken to infuse liquidity into the banking system and also to address problems being faced by various non-bank financing companies. These steps have ensured that the financial system is functioning effectively without suffering the kind of loss of confidence experienced in the industrialized world.
1. www.rbi.org.in
2. www.indexmundi.com
