Fiscal deficit

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basavaraju (Querist)

01 March 2013 Respected Sir,
i wanted know whats the impact on country currency and also for corporate s from fiscal deficit in budget

CA Harish Suwalka

CA Harish Suwalka (Expert)

13 July 2013 Fiscal policy is an instrument in the hands of government for reallocation of resources according to nation’s priority, redistribution, promotion of private savings & investments & the maintenance of stability. An expansionary fiscal policy means more investment spending on part of government. This increases the interest rates in the economy because government resort to borrowings to finance the expenditure. When interest rates rise, they cause private investment to fall. This phenomenon is called "Crowding out of private investment". A contractionary fiscal policy means less expenditure by government, which hampers the economic growth of a country. So the government has to strike a balance between growth prospects & crowding out.

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