In India, deficit financing is used for raising resources for

In India, deficit financing is primarily utilized to raise resources for economic development. It is defined as the practice where the government spends more than it receives in revenue, covering the gap through public borrowing or the creation of new money [2]. Developing nations like India extensively apply this tool to finance critical infrastructure, welfare programs, and long-term development projects that cannot be funded solely through tax revenue. While it stimulates economic activity and aggregate demand, it is also associated with risks like inflation and fiscal indiscipline. Historically, India relied on direct monetization of the deficit by the RBI, but since the 1997 agreement and the subsequent FRBM Act of 2003, the focus has shifted toward market-linked borrowings and fiscal consolidation to manage these developmental expenditures sustainably [5].

Sources

1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > DEFICIT FINANCING > p. 113
2. [2] https://ebooks.inflibnet.ac.in/mgmtp12/chapter/deficit-financing/
3. [3] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Status of Deficit Financing in India > p. 114
4. [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.9 Monetization of Deficit and Deficit Financing > p. 164
5. [5] http://dea.gov.in/files/other_reports_documents/govt_debt_status_paper_2016.pdf