A large fiscal deficit is an indication that the economy is in trouble and will have reasons to worry. A high fiscal deficit, amongst many, could pose an
Also, the government expenditure puts pressure on interest rates creating a negative impact on savings. And yes, the Indian government can choose to import money into the country to balance the soaring fiscal deficit, but this move could appreciate the country’s currency and the government will have to pay interest on its borrowings, eventually increasing the deficit and affect the country’s economic growth. Therefore, delay in adjusting high fiscal deficit shows that the government cannot control its finances properly.
Did you know that several government projects are stalled because of high fiscal deficit? Here’s why. When a country labors under high fiscal deficit, it limits the government’s spending capacity and this has an effect on the continuous funds various projects need. Infrastructure projects, or welfare policies, or education and healthcare projects, for example.
The trouble with high fiscal deficit is that it leads to higher interest rates, disturbing the entire economy. Since the government is not earning much, it will have to restrict its expenses, unless it chooses to borrow. And since the government abilities are doubted idue to its incapacity to control its profligacy, it is very difficult for the government to access loans. And even if it gets loans, they are at given at high interest rates. On the one hand, the government borrows because it does not have enough money, and on the other hand, it has to pay more for borrowing money. Hence, fiscal deficit leads to a slow progress of the nation and slow progress of its people.
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- inflation risk
- minimize the growth of the economy
- doubt the government’s abilities
- it could affect the country’s sovereign rating, which in turn will limit foreign investors from looking at India as one of the investment hubs.
Also, the government expenditure puts pressure on interest rates creating a negative impact on savings. And yes, the Indian government can choose to import money into the country to balance the soaring fiscal deficit, but this move could appreciate the country’s currency and the government will have to pay interest on its borrowings, eventually increasing the deficit and affect the country’s economic growth. Therefore, delay in adjusting high fiscal deficit shows that the government cannot control its finances properly.
Did you know that several government projects are stalled because of high fiscal deficit? Here’s why. When a country labors under high fiscal deficit, it limits the government’s spending capacity and this has an effect on the continuous funds various projects need. Infrastructure projects, or welfare policies, or education and healthcare projects, for example.
The trouble with high fiscal deficit is that it leads to higher interest rates, disturbing the entire economy. Since the government is not earning much, it will have to restrict its expenses, unless it chooses to borrow. And since the government abilities are doubted idue to its incapacity to control its profligacy, it is very difficult for the government to access loans. And even if it gets loans, they are at given at high interest rates. On the one hand, the government borrows because it does not have enough money, and on the other hand, it has to pay more for borrowing money. Hence, fiscal deficit leads to a slow progress of the nation and slow progress of its people.
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