Fiscal deficit, a critical macroeconomic indicator, represents the excess of total government expenditure over its total revenue (excluding borrowings). It serves as a key reflection of a nation’s fiscal health and its ability to maintain economic stability and growth. In the Indian context, fiscal deficit has long been a subject of policy debate, particularly concerning its implications for inflation, public debt, investment, and overall economic prosperity. The post-1991 economic liberalization era, often termed India’s phase of economic melioration, marked a transformative period in fiscal management. However, persistent fiscal imbalances have continued to challenge the objectives of inclusive and sustainable development.

During the pre-reform period, fiscal deficits in India were largely driven by revenue expenditures and inadequate fiscal discipline. The economic reforms of 1991 aimed to correct these structural imbalances through fiscal consolidation and market-oriented policies. Yet, despite several initiatives such as the Fiscal Responsibility and Budget Management (FRBM) Act of 2003, successive governments have struggled to contain deficits due to rising public expenditure on subsidies, welfare schemes, and infrastructure development. The global financial crisis of 2008-09, the implementation of the Goods and Services Tax (GST) in 2017, and the COVID-19 pandemic further exacerbated fiscal pressures.