Fiscal Deficit in India: Meaning, Causes, and Impact A fiscal deficit arises when the government's total expenditure during a financial year is greater than the revenue it earns, excluding borrowed funds. This shortfall reflects the amount the government needs to raise through borrowing to finance its expenses. In India, the fiscal deficit is commonly expressed as a percentage of the country's Gross Domestic Product (GDP), making it easier to assess the government's fiscal position relative to the size of the economy.