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The Budget and the deficit

The government spends more than it collects every year. Where does the gap go, who lends it, and what is the interest already costing?

Chapters

Beginner

  1. What the government's accounts areTwo columns and one distinction that decides everything. Money in, money out, and whether a rupee of either builds something or merely runs something — and the Union government publishes the whole thing monthly.

Intermediate

  1. The three deficitsFiscal, revenue and primary. The one that gets quoted is the least informative, and the one that almost nobody quotes answers the question everybody is actually asking.
  2. Where the money comes fromTax is the big one and the figure in the accounts is already net of what the states take. Non-tax revenue was at 72% of its annual estimate at the halfway point, which is a story about one cheque rather than about buoyancy.
  3. Where it goesInterest payments of ₹6,46,010 crore against a deficit of ₹7,14,413 crore. The government borrowed to pay the interest on what it borrowed before, and half of every rupee of net tax revenue never reaches a policy at all.

Advanced

  1. Reading the monthly accounts"Fiscal deficit hits 42.1% of target" was reported as deterioration. At the halfway point of the year, 50% is the pace — so it was running under target, and the document says so itself in a note nobody quotes.
  2. How the deficit is financedOf ₹7,14,413 crore borrowed in six months, ₹2,189 crore came from abroad — three-tenths of one per cent. India's government debt is owed almost entirely to Indians, and that single fact is why its deficits behave differently.