Fiscal Deficit, Current account deficit, budget deficit!! Are you reading a lot about all kinds of deficits? Wondering how these deficits would affect your investment. Read on to find out the relationship between a fiscal deficit and you investment.
As the name indicates, a fiscal deficit is a difference in the government’s spending wrt its earnings.
Let us take an example of your house hold. If your spending exceeds your earning potential, you will try to put in measures to reduce your expenditure. Similarly, the government also puts some stringent measures to reduce the fiscal deficit quotient. Reducing subsidies, reducing the interest rates and increasing exports are some of the measures that the government undertakes to help reduce the fiscal deficit – and thereby stabilize our economy.
A fall in the interest rates means that you would earn less for the amount that you invest in banks. Similarly, reduction of subsidy also means that it would affect everyone who is taking the benefit of it. Curbing fiscal deficit in a positive way affects your investments proportionally. Reduction in fiscal deficit, reduces inflation, affects the stock market and also the equity funds.
So, next time to plan to invest your hard earned money, keep an eye on these factors too to help you make wise decisions.