How does the government deficit affect the economy?

Government budget deficit occurs when the Government spending is more than the revenue generated by the Government. More spending could be due to money spent on social welfare schemes, infrastructure creation etc. This could help in boosting the economy of the country. You can read about the Union Budget 2021 Summary in the given link.

In some cases the deficit could also increase the taxes and inflation. 

Further readings:

  1. Difference between Economic Survey and Union Budget
  2. Previous Years Economics Mains Questions in UPSC Civil Service Exam, General Studies Paper – 3

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