AN ASSESSMENT OF FISCAL DEFICIT AND ITS IMPACT ON ECONOMIC GROWTH OF DEVELOPING COUNTRIES (A CASE STUDY OF INDIAN ECONOMY)

The slowing world economy and the weakness of the Indian rupee could not come at a worse time. The fiscal position has dramatically deteriorated and is about to emerge as a pressure point in the Indian economy. Indeed, fiscal risks continue to be severely underestimated. At present the fiscal deficit in Indian economy ?? ?b??t 11% of GDP. The government’s goal ?? to bring it down to 3% of the country’s GDP. The exclusive deficit of the central government ?? ?b??t 7% of the GDP in FY 2011-12, against a target of 4.6% and announced additional issuance of 0.6% of GDP. The data on Indian economy as per the recent economic survey confirm economic recovery and commendable growth in almost all the indicators, of course with some concerns like food inflation etc. The budget 2012-13 shows the intention of the government to stick to stronger fiscal consolidation path to ensure greater stability while acknowledging the need for striking balance between demand and supply side aspects for better macro-economic management. This paper proceeds to investigate the dynamics of the relationship between fiscal deficits and economic growth in India.