India has a 'high fiscal deficit target' on the agenda, highlighting factors contributing to high fiscal deficit in India, discuss the potential consequences of such deficit and suggest measures to ensure fiscal consolidation.

The fiscal deficit targeted at 5.9% for the Budget 2023. Government is on a path to fiscal consolidation as per FRBM Act. Reasons for high fiscal deficit: (1) Social sector spending on health, education for vast population requires resources (2) Welfare subsidies like food subsidy (28 lakh crore), fertilizer subsidy (50k cr) etc increase deficit (3) Need for capital formation to boost infrastructure for economic growth creates pressure. States also resource demand (4) Limited taxation revenue, i.e close to 16% of GDP and only 24% others pay tax => leads to less resource mobilization

Potential Consequences: (1) Leads to high borrowing costing burden on future generations (2) Impacts macro economic stability, high fiscal deficit was one reason for BoP crisis in 1991 (3) Limit government spending potential towards poverty alleviation and infrastructure Measures for fiscal consolidation: (1) Widening the tax base and rationalising welfare expenditure by better targeting via SAM (Socio Audit Module) (2) Improve tax collection efficiency (3) Improve tax collection efficiency (4) Governance reforms like RTI, social audit, etc to reduce wastage