– 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

Governments repay their debts via taxation.

GDP is a measure of how much you can theoretically tax.

Using Debt to GDP ratio is a way to apples-to-apples compare countries ability to repay their debts.