What Is Fiscal Slippage? Is It Different From Fiscal Deficit?

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Fiscal slippage in simple terms is any deviation in expenditure from the expected. To understand it better, we take into account an example, like say a trader wishes to buy a certain stock at Rs. 10 and 1000 in number. But the story doesn't ends here, it is not as simple as this because there is market forces such as demand and supply involved i.e liquidity in the stock or volumes traded in it as well as intermediaries in the chain.

What Is Fiscal Slippage? Is It Different From Fiscal Deficit?

So, there is likely a chance that the trader is able to secure some of the outstanding shares of the company say 500 at Rs. 10 while secure the remaining at Rs. 15 due to intermediaries who influence the price of a stock to a significant degree. This is what is referred to as fiscal slippage.

On a larger level, say the central government when the government's expenditure surpasses the expected or estimated levels it is the fiscal slippage threat that the country then reels in.

Fiscal deficit in comparison to fiscal slippage is a broader term

The measure provides a broader outlook and is computed using a simple formula
Total budget expenditure - (Total Budget Receipts - Borrowings)

Here the govt does'nt takes into account any kind of borrowings.

Read about What is Fiscal Deficit?

Current status of Indian economy in respect of fiscal slippages and how it is being handled?

Some of the factors which have caused the country to slip into a situation of confronting fiscal slippages include farm loan waivers, cut back on GST collection, reduction in VAT and excise due to lessen the impact of rising brent crude oil price.

The aftereffect of such a situation is vigilant has higher inflation which on retail level as CPI stood higher at over 5% for the month of December as against the government safe levels of 4%.

Ways to manage fiscal slippage

Expenditure should be done as far as possible in line with planned and judiciously such that it is not faltered at very widely.

Disinvestment is another way out to come out of the slippage.

Proceeds from revenue collection to be used towards promoting economic sectors and in turn create jobs and likewise enhanced production and consumption.

Subsidy cut down to judicious level.

Tax mechanism should also be such that it does not create any kind of fear while settling their tax dues.


Story first published: Friday, January 19, 2018, 7:07 [IST]
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