– 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

Because different economies are different sizes. A country with an economy the size of the US or China can cope with a annual deficit of a trillion dollars, while a trillion dollar deficit would likely be absolutely devastating for a smaller country/economy like France or Canada or whatever.

Expressing the deficit as a percentage of the country’s GDP goes a decent way towards contextualizing their current spending in regards to the size of their economy.