International Journal of Economic and Business Management
 

 Vol. 6(2), pp. 8-14,  September, 2018.

ISSN: 2384-6151

DOI: 10.14662/IJEBM2018.041

Full Length Research

Economic Growth vs. Fiscal Deficit: Issues and challenges of a growing fiscal deficit.

Dr.  Rajeev Rana*

Visiting Faculty, Department of Economics at S.G.R.R. P.G College, Pathribag, Dehradun, Uttarakhand, India.

Accepted 1 September 2018

Economic growth is essential for economic development, to achieve high pace of economic growth in the era of globalization more investing activities required in the economy by government to maintain the pace of growth. For which government may run out of budget as they spend more form their budget and running out of budget due to which they might face situation of fiscal deficit. So, a rising fiscal deficit is not only essential but also crucial for economic growth. To achieve even a moderate pace of growth, a choice of expansionary fiscal policies becomes essential particularly in emerging economies. In the context of Indian economy, a continuously increasing Non-plan expenditure (consisting of interest-payment, defenses expenditure, pays and allowances, pension, and subsidies) as compared to plan expenditure is major reason behind growing fiscal deficit in India. In view of this, it is suggested that government should make viable trade-off between economic growth and fiscal deficit. There is a strong need for effective implementation of Fiscal Responsibility Budget Management (FRBM) Act. This being a joint responsibility of center and state government, a special incentives should be provided to those states which meet the FRBM targets as this will encourage others to make continuous efforts to keep their fiscal deficit within the ambit of Act. Further, Non-plan expenditure should be reduce, subsidies should be targeted to vulnerable group only and more emphasis should be given to the poor class, and their effective monitoring and transparencies will improve fiscal position in many ways.

Key world:  fiscal deficit, economic growth, public debt.

JEL Classification : D14, E62, H53.

Cite This Article As: Rana R (2018). Economic Growth vs. Fiscal Deficit: Issues and challenges of a growing fiscal deficit. Inter. J. Econ. Bus. Manage. 6(2): 8-14.

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