Fiscal deficit is the difference between total revenues and total expenditure of the government. Given that the Indian government spends more than it earns it runs a fiscal deficit, which is financed by market borrowings. Government borrowing every year adds to the stock of outstanding debt that is at close to Rs 40 trillion. Given rising government debt, interest cost for the government rises every year (Read our note on Expenditure Budget) that in turn puts pressure on government finances, which in turn leads to fiscal deficit, which again leads to government borrowing and increase in stock of outstanding debt. A classical self-fulfilling cycle.