Gross versus Net Fiscal Deficit

Definition

The gross fiscal deficit is the government's total borrowing requirement in a year (total expenditure minus receipts excluding borrowing); the net fiscal deficit is the gross fiscal deficit minus the net lending (loans) the government itself extends to others, such as states and public enterprises.

Key points

• Gross fiscal deficit equals total expenditure minus (revenue receipts plus non-debt capital receipts); it is the headline figure usually quoted; see concept fiscal deficit.
• Net fiscal deficit equals the gross fiscal deficit minus the net domestic lending by the government (loans given out minus loans recovered).
• The net figure shows the government's own net borrowing after stripping out funds it merely passes on as loans.
• The commonly reported and FRBM-tracked target is usually the gross fiscal deficit as a percentage of GDP; verify the latest target and outturn.
• Both are distinct from the revenue deficit and the primary deficit; see concept primary deficit.

Why it matters for CAPF

The distinction (gross is total borrowing need; net subtracts government's own lending) is a precise budget-definition fact that can appear in matching form.

Common confusion

Gross fiscal deficit is the total borrowing requirement; net fiscal deficit subtracts the loans the government itself gives out; the headline FRBM figure is the gross deficit.

Parent note

budget and fiscal policy