THEORETICAL PERSPECTIVES ON FISCAL DEFICITS AND THEIR INFLUENCE ON ECONOMIC GROWTH

Fiscal policy assumes a significant part in the economic development of a nation. The impact of fiscal imbalance on economic growth is a significant concern, not only for India but also for other emerging nations. The influence of fiscal policy and fiscal deficit on economic growth has been a subject of extensive debate in the field of economics. Within the macroeconomic literature, various schools of economic thought analyse the effects of budget deficits on economic activity. There exists a distinct divergence of perspectives regarding this matter. There is a divergence of opinions among economists about the impact of budget deficits on macroeconomic activity, with some asserting a positive effect, others asserting a negative effect, and yet others asserting a neutral effect. In order to gain comprehension, this study delves into the theoretical framework adopted by economists, exploring diverse perspectives on government deficit measures and distinct schools of thought, including Classical, Neo-classical, Keynesian, and Ricardian equivalence. The objective is to elucidate the manifold effects of fiscal deficit on economic growth.