Institutional Flows & Policy
Fiscal Deficit
The gap between the government's total spending and its total revenue (excluding borrowings), usually expressed as a % of GDP.
A fiscal deficit means the government is spending more than it collects in revenue and must borrow to cover the gap. Markets watch the fiscal deficit target closely around Union Budget time — a wider-than-expected deficit can pressure bond yields (the government needs to borrow more, competing with corporate borrowers for funds) and is sometimes read as inflationary if the extra spending isn't productive.
A credible, narrowing fiscal deficit path is generally viewed positively by rating agencies and foreign investors as a sign of fiscal discipline.