Fiscal deficit is a term, which we hear very often these days. Then, what is fiscal deficit? And how does it ‘affect’ a countries economy?  Fiscal deficit, in a country’s economic parlance does mean the gap between a government’s revenue and its expenditure. In other words, it is the case where in the expenditure of the Government does cross its revenues. In such cases such a Government would be forced to borrow, from various sources, in order to meet its expenses. It is just like a middle class budget family, which got a fixed income source, which could not fulfil its expenditures. Then such a family would be forced to borrow. There ends the comparison between the family unit and the Government. Governments could borrow, from their central banks and could get their need fulfilled; by the minting of more money.  For example, our country could obtain funds from the RBI in order to fulfil its need for additional money. This is called as deficit financing. The other way is to go in for obtaining funds from the money market. And this is done primarily from the banks. On occasion borrowing from foreign the countries or international organizations like the IMF too are common.  There are different arguments as to the issue of sustaining the fiscal deficits. Some, modern monetarists argue that, if a country holds fiscal deficit, it would suffer from inflation. It is because of the more circulation of the money in the market, than the actual production or productive activity in the country. The other side of the argument which favours fiscal deficits is that, it would help the countries in overcoming the economic crisis or recessions. It believes that by pumping in more money into the market, it could be stimulated via more demand generation. Our country of late is subscribing to the first of the above said views. And thus is trying to control fiscal deficits, either by disinvesting from the public sector undertakings or else by cutting upon the subsidies that are given to the poor. By disinvestment it wants to raise monies as revenues. By, cutting subsidies, it wants to reduce its expenditures.