WHY DO GOVT. BUDGET DEFICIT GROW DURING RECESSION? [55]

SUBMITTED BY:-
VIVEK GARG
MBA (I SEM)



WHY DO GOVT. BUDGET DEFICIT GROW DURING RECESSION? [55]

INTRODUCTION

Before discussing govt. budget deficit grow during recession firstly we discuss meaning of budget deficits and recession.
BUDGET DEFICIT
Budget deficit refers to situation when budget expenditure of the govt. are greater than the budget receipt. Revenue deficit, fiscal and primary deficit is part of budget deficit.
RECESSION
It is part of trade cycle, under the recession period there is decrease in demand of product, people are unemployed and investment is low also.
DISCUSSION
In order to control the deficit demand the government interference is must. Due to decrease in demand of product, the investor will invest less amount, employer will not give employment to all person. Both above point are encourage only when the government would spend huge amount of expenditure. Government budget deficit grow directly or indirectly during recession. Directly the govt. would provide subsidies for setting up industries and all the input which is necessary to produce the output at low cost. Indirectly the govt. would encourage the public to invest or increase their consumption by providing good qualities product at reasonable rate. In this way the people will invest more to buy the product at reasonable price. To fulfill the increase in demand the producer will need more workers. Thus the person which are unemployed during recession will get the work. The whole procedure is possiable only with the help of govt. expenditure.
CONCLUSION
It is govt. expenditure which will encourage both producer to produces more and consumer to consume more. With the increase in govt. expenditure it’s budget will become deficit. Therefore we can say that govt. budget deficit will grow to handle the recession situation.