– why is fiscal deficit mentioned as a % of GDP (gross domestic product) ?

Question

I was recently reading news on India’s interim budget and I read something that by 2025 they (the country) expect fiscal deficit to be x% of GDP, and it had me confused.
How is GDP, which a metric for production and exports imports within a country, an appropriate base for fiscal deficit?

In: Economics

Answer 1

Imagine you’re in a million dollars of debt.

But your job pays you 2 million dollars a year.

Not a big deal.

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Imagine you’re in a million dollars of debt.

but your job pays you 50k a year.

Big deal.

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Same thing, but with an entire economy.