Debt Dynamics in India – Is Fiscal Deficit Good or Bad for an Economy

Abstract : Fiscal Policy plays a vital role in any economies development and also plays an important role in their policy making. According to the economics literature, Debt and Monetary financing are the sources of financing fiscal deficit. There are ample of studies and evidences from the literature that shows the relationship between fiscal deficit and public debt. For any economy the most important thing that matters is to understand ‘Debt Dynamics’. This paper attempts to explain what debt dynamics means, it goes further why fiscal deficit is important and also attempts to explain whether Fiscal Deficit is Good or bad for an economy.