<p>Because debt to GDP is measured as total debt country has divided by GDP, which is done to compare the debt to the size of economy (<span class="math-container">$D/GDP$</span>)</p>
<p>Fiscal deficit is a negative difference between tax revenue and expense country has in a given year (<span class="math-container">$T-G$</span>).</p>
<p>Even if you divide fiscal deficit by GDP (<span class="math-container">$(T-G)/GDP$</span>) there is no reason for them to be similar.</p>
<p>Fiscal deficit is a deficit for particular year. Total debt is sum of all fiscal deficits a country had over multiple years. In fact <span class="math-container">$D=\sum (T_t-G_t)$</span> for every year that <span class="math-container">$T&lt;G$</span>.</p>
<p>So there is no reason why they should be close. Especially if a country accumulated a lot of debt over past decades it will be very improbable current deficit will manage to get so big it will be similar to all past debt that country accumulated.</p>

CC BY-SA 4.0
2022-02-13T09:02:43.070Z
Good morning! I can't seem to parse your first sentence, will you please take a look at it and see if you mistyped something?
Giskard
CC BY-SA 4.0
2022-02-13T09:06:31.733Z
@Giskard I edit it is it clearer?
1muflon1
CC BY-SA 4.0
2022-02-13T09:07:52.650Z
I think a few articles are still missing, but yes, I get it now.
Giskard
CC BY-SA 4.0
2022-02-13T08:59:07.373Z
2022-02-13T09:06:04.640Z
2022-02-13T09:06:04.640Z
1muflon1
<p>Just because two things are expressed as a proportion of the GDP, they can be very different, e.g., I can express my salary in terms of my country's GDP, but clearly this is different from the debt to GDP ratio.</p>
<p><strong>Deficit vs. debt</strong></p>
<p>If I make less money in a month than I spend, I have a deficit for that month. This does not necessarily mean that I will be in debt - perhaps I had savings to rely on. The opposite is also possible: perhaps I had a surplus this month, and I used it to pay part of a debt that I owe.</p>
<p>Countries are not people, but the logic is pretty much the same. Current debt is kind of like the future value of past deficit/surplus cashflows.</p>

CC BY-SA 4.0
2022-02-13T09:01:46.233Z
2022-02-13T09:01:46.233Z
Giskard
<p>The fiscal deficit is the gap between expenses and earnings. For the fiscal year 2020-21, India's debt to GDP ratio was 59.3%; and the fiscal deficit was 9.2% of GDP.</p>
<p>How come debt is larger than the fiscal deficit, especially since both values are expressed in terms of proportion of GDP?</p>

<macroeconomics><gdp><government-debt><fiscal-policy>
Why there's a large difference between fiscal deficit and debt to GDP ratio of a country?
Anurag Pradhan
# Why there's a large difference between fiscal deficit and debt to GDP ratio of a country?

(Asked by: username_0 on 2022-02-13)

The fiscal deficit is the gap between expenses and earnings. For the fiscal year 2020-21, India's debt to GDP ratio was 59.3%; and the fiscal deficit was 9.2% of GDP.

How come debt is larger than the fiscal deficit, especially since both values are expressed in terms of proportion of GDP?

**Tags:** macroeconomics, gdp, government-debt, fiscal-policy


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## 2 answers

### Answer by username_1 on 2022-02-13. Score: 2

Because debt to GDP is measured as total debt country has divided by GDP, which is done to compare the debt to the size of economy ($D/GDP$)

Fiscal deficit is a negative difference between tax revenue and expense country has in a given year ($T-G$).

Even if you divide fiscal deficit by GDP ($(T-G)/GDP$) there is no reason for them to be similar.

Fiscal deficit is a deficit for particular year. Total debt is sum of all fiscal deficits a country had over multiple years. In fact $D=\sum (T\_t-G\_t)$ for every year that $T.

So there is no reason why they should be close. Especially if a country accumulated a lot of debt over past decades it will be very improbable current deficit will manage to get so big it will be similar to all past debt that country accumulated.

> **Comments:**
> **username_2**: Good morning! I can't seem to parse your first sentence, will you please take a look at it and see if you mistyped something?  
> **username_1**: @username_2 I edit it is it clearer?  
> **username_2**: I think a few articles are still missing, but yes, I get it now.  

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### Answer by username_2 on 2022-02-13. Score: 1

Just because two things are expressed as a proportion of the GDP, they can be very different, e.g., I can express my salary in terms of my country's GDP, but clearly this is different from the debt to GDP ratio.

**Deficit vs. debt**

If I make less money in a month than I spend, I have a deficit for that month. This does not necessarily mean that I will be in debt - perhaps I had savings to rely on. The opposite is also possible: perhaps I had a surplus this month, and I used it to pay part of a debt that I owe.

Countries are not people, but the logic is pretty much the same. Current debt is kind of like the future value of past deficit/surplus cashflows.


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