A fiscal deficit occurs when a government’s total expenditures exceed the revenue that it generates, excluding money from borrowings. Deficit differs from debt, which is an accumulation of yearly deficits. Government borrows this amount to finance their budget shortfalls. This study is focused on the major changes in the India’s fiscal policy, reasons of rising deficit in the Indian economy, deficit in pre-1991 era, changes after adopting New Economic Policy (Liberalization, Privatization and Globalization), Fiscal Responsibility and Budget Management (FRBM) to restore fiscal discipline, strategies to return a path of fiscal consolidation. The study found that in fiscal policy was redefined after 1991 policy, after 1980- 81 was a critical phase due to which new economic reforms was to be adopted and economy was restructured. In 2003 FRBM Act was passed to reduce the fiscal deficit as a percentage of GDP leading to a more efficient economy.