Fiscal Deficit & its Impact on Economic Growth

The paper examines the fiscal deficit in India, its components, and historical trends across both pre- and postliberalisation eras. It explores the dual role of fiscal deficits as tools for economic growth and potential barriers to financial stability. Positive impacts include economic stimulus, job creation, and infrastructure development, while negative aspects involve inflation, debt sustainability, and crowding out of private investments. The analysis encompasses key drivers, including government spending, subsidies, and tax policies, as well as the impact of external shocks such as the COVID-19 pandemic. Our findings conclude with policy recommendations for sustainable fiscal management and future research directions.