# Why there's a large difference between fiscal deficit and debt to GDP ratio of a country?

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?

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.

• 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? Feb 13 at 9:02
• @Giskard I edit it is it clearer?
– 1muflon1
Feb 13 at 9:06
• I think a few articles are still missing, but yes, I get it now. Feb 13 at 9:07

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.