Fiscal Indicators & Borrowing
- Posted by Trading Campus
- Date November 28, 2017
- Comments 18 comments
Government indicators are concerned with government revenues and expenditures. Taxes and duties take out money from the system whereas spending is injection of money in the economy.
Government Revenues
There are two sources of income of the government:
- Taxes
- Non-Tax
Taxes are further subdivided into direct and indirect taxes. Under direct tax, income for the government comes from tax levied on incomes from personal and corporates and goods and services such as customs, excise, GST. These taxes provide resources to the government to carry out its functions of national security and public expenditure.
The non-tax income for the government includes income from dividends from public sector companies, interest on loans provided by the government to other agencies and income from spectrum auctions or divestment of its holdings from government holding companies.

The above figure depicts the government revenue earned in year 2016-17 by the government was Rs 14,397 Billion and from mar-17 to aug-17 the government revenue has been collected till Rs 4,254 Billion.
Expenditure
The government spending includes planned and non-planned expenditure in a particular fiscal year declared in every government budget agenda. The non-planned portion usually carries more percentage weight on government spending.
The non-planned expenditure include government spending on defence and security, social security, its interest payments, subsidies and administrative spending including salary hikes for government employees.
The planned expenditure includes capital spending on infrastructure such as roads, healthcare, education, industrial training, research and development, urbanization of region and yojnas for benefit of general public.

The fiscal expenditure by the government from mar-17 to aug-17 has stood at Rs 9,504 Billion.
Fiscal Deficit and Borrowing
When the government spending gets greater that its revenue, the balance tends to be running a deficit. This deficit is filled by government borrowing, where the government issues bonds to the public and raises money to fund its expenditure.
The higher the fiscal deficit, the more likely is that the interest rates will rise. This is because the government is now raising loans from the market and given the limited availability of funds at the institution disposal, a rise in amount of credit would lead to higher interest rate.

However, India’s Budget deficit to GDP has been declining since past few years. It usually turns alarming when the budget deficit to GDP number gets beyond 4% specially for emerging market economies.
Government Debt to GDP
The government debt I the cumulative total of all borrowing less repayments. It is financed mainly by the citizens and may be seen as a transfer between generations. If government debt remains high which is usually beyond 100% of GDP then it could turn out to be alarming as credit rating agencies would downgrade the economy and interest rates tend to run towards north. This would impacts the living of the citizens of to country as for repayment of debt, the government has to impose higher taxes to its citizens.

India’s debt to GDP level are at a moderate level and risk of downgrade is low.
You may also like
Arithmetic Operators
There are around 7 arithmetic operators available in python. These are called as binary operators because they act on two operators. a = 13, b = 5 Operator Meaning Example …
Operators in Python
An operator is a symbol that performs an operation. Some examples of operations are addition, subtraction, multiplication etc. a + b is an operation where a,b are operands and ‘+’ …
Bear Call Spread
Bear call spread is an option strategy used by traders to cap their maximum loss. At first, a trader is bearish with the downside capped, so he initiates a sell …
18 Comments