Why is the deficit bad?

Whether the fiscal deficit is good or bad is a matter of debate among economists. The nature of deficit helps one to understand whether the consequences of deficit will be good or bad. If there is more fiscal deficit due to lower revenue generation by the Government, then there could be a possibility of facing higher inflation, and higher taxes. You can read about the Union Budget 2021 Summary in the given link.

If the deficit is due to Government spending more to boost some industries or infrastructure, then those industries or sectors could gain more and help the economy.

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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