Gross Fiscal Deficit (GFD) in economics refers to the excess of the government’s total expenditure (both revenue and capital) over its total non-borrowed receipts. It represents the total borrowing requirement of the government in a fiscal year. It is calculated as:

Gross Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts)

This includes all borrowings, both from internal and external sources, to bridge the gap between the government’s income and its overall spending.

GFD is a key indicator of the government’s financial performance and overall fiscal health. A high fiscal deficit indicates that the government is spending beyond its means, relying heavily on borrowing. While some level of fiscal deficit is acceptable—especially for funding capital investments that spur long-term growth—persistent or excessive deficits can lead to debt accumulation, inflationary pressures, and crowding out of private investment due to higher interest rates. Policymakers closely monitor GFD to maintain macroeconomic stability, guide fiscal consolidation efforts, and design prudent budgetary frameworks. For developing economies like India, managing GFD is crucial to ensure a balance between developmental spending and fiscal discipline. Sustainable levels of fiscal deficit are essential to boost investor confidence, maintain sovereign credit ratings, and support long-term economic growth.