Question -
Answer -
- Fiscal deficit is always a wider concept than revenue deficit.
- Revenue deficit is defined as the excess of government’s revenue expenditure over revenue receipts. In terms of formula:
- Revenue Deficit = Revenue Expenditures (RE) – Revenue Receipts (RR)
- In short, there will be revenue deficit in a government budget when revenue expenditure exceeds revenue receipts.
- Fiscal deficit is defined as the excess for all expenditure over total receipts net of borrowings.
Initially, Fiscal deficit does not take into account all types of receipts. It does not take into account borrowings. But finally they have to depend on borrowing to met fiscal deficit.
Fiscal Deficit = Revenue Deficit + Capital Deficit (Excluding Borrowing)- Borrowing
= Net borrowing at home + Borrowing from RBI + Borrowing from abroad