2023, Vol. 6, Issue 1

author(s)
Aditi Kumar Tripathi and Dr. Vivek Sharma

abstract
The paper works on the emergence of deficit financing after the commencement of World War I and II. It gives an historical analysis of how deficit financing affected the productivity of Industrial countries, the deficit increased to such exorbitant levels that it touched 50 to 60% of the GDP, of the many western countries. This resulted in putting the pressure on social policies and the unemployment increase in most of the countries which are studied in this chapter. The paper gives a descriptive view of the theories based on deficit financing. It was essential for the world to reduce its deficit, and hence the concept of reducing the percentage of deficit finance to Gross Domestic Product came forward. India in the year 2000 put forward the FRBM Act, which made it compulsory for the government to make the deficit lesser and lesser. Though in spite of these ruling and Act, the deficit has been increasing though the percentage in terms of GDP may be coming down. Yet the paper describes, that what are the basic sources of deficit financing and since the inflation has to be kept in check, the Monetarist and the finance department, has to play the tug of war.