| Definition |
Total amount of money a government owes to creditors over time. |
Shortfall between government revenues and expenditures in a specific fiscal year. |
| Time Frame |
Accumulated over multiple years. |
Measured annually (or within a single fiscal period). |
| Nature |
Stock concept – total outstanding liabilities. |
Flow concept – yearly gap between income and spending. |
| Components |
Includes past deficits minus any surpluses. |
Occurs when annual spending exceeds revenue. |
| Causes |
Consistent deficits, interest payments, public borrowing. |
Overspending, economic downturns, tax cuts, or emergencies. |
| Impact |
Long-term burden on economy, affects credit rating and interest costs. |
Indicates short-term fiscal imbalance and may lead to borrowing. |
| Government Response |
Can be managed via debt restructuring or long-term policy changes. |
Can be reduced by increasing taxes or cutting spending in the short term. |
| Public Perception |
Seen as a measure of a country’s overall financial health. |
Viewed as a sign of current government fiscal discipline or mismanagement. |
| Repayment |
Usually repaid over decades through taxation and economic growth. |
May be eliminated with a surplus in the following year(s). |
| Examples |
India’s national debt includes borrowing through government securities. |
India’s fiscal deficit in a year reflects the annual budget shortfall. |
| Relation |
National debt rises when deficits occur repeatedly. |
Deficit adds to the national debt if funded through borrowing. |
| Interest Payments |
Government pays interest on the national debt. |
Deficit may include interest payments in the budget. |
| Measurement |
Expressed as a total amount or % of GDP. |
Expressed as annual gap in currency units or % of GDP. |
| Impact on Future Budgets |
Reduces fiscal flexibility due to interest obligations. |
Forces government to adjust future revenue and expenditure plans. |
| Foreign Investment |
High debt may deter investors or raise borrowing costs. |
Moderate deficit is often tolerated if growth prospects are strong. |
| Economic Indicator |
Used to assess sustainability of fiscal policy. |
Used to monitor short-term fiscal performance. |
| Can Be Positive? |
Generally viewed negatively if too large, but acceptable for development spending. |
Sometimes used for stimulus or public investment during downturns. |
| Policy Focus |
Focused on long-term debt sustainability. |
Focused on balancing annual budgets and deficits. |
| Fiscal Discipline |
Debt reduction requires consistent surplus or controlled deficits. |
Deficit control is the first step toward reducing national debt. |
National Debt vs National Deficit