Q. 164.0( 1 Vote )

Explain the

Answer :

Budget deficit refers to the total budget expenditure (both revenue expenditure and capital expenditure) exceeding the total budget receipt (both revenue receipt and capital receipt).

Budget deficit = total expenditure minus total receipt.


There are three different types of budget deficits:


a. Revenue deficit:


● Revenue deficit is the excess of total revenue expenditure of the government over its total revenue receipt.


● Revenue deficit = expenditure minus total revenue receipt.


● It indicates the dis saving of the government because the government has to make up for the uncovered gap.


● It is done by using the capital receipts either by borrowing or through selling its assets.


● The government usually uses its capital receipt to meet the consumption expenditure which leads to an inflationary situation in the economy.


● The two measures to reduce revenue deficit are:


i. The government should reduce all its un productive expenditure.


ii. The government should increase its revenue from various tax and nontax revenue sources.


b. Fiscal deficit:


● The fiscal deficit is the excess of total expenditure over total receipt of the government excluding borrowing.


● It indicates the capacity of the government to borrow in accordance with what it produces.


● It is also an indicator of the extent of the government's dependence on borrowing to meet its expenditure requirements.


● This increases the liability of the government to repay the loan along with the interest which leads to an increase in the revenue deficit.


● The government borrows either from the central bank or from the governments of the other country.


● This leads to an increased dependence on others.


● Borrowing from foreign countries leads to economic and political interference which increases the economic slavery of the government.


● The government not only has to pay the loans but they also have to pay the amount in interest which increases the financial burden.


● The payment of the interest increases the revenue expenditure of the government which leads to increase in the revenue deficit. This vicious circle is called a debt trap.


c. Primary deficit:


● The primary deficit is the fiscal deficit minus interest payment.


● It is an indicator of the borrowing requirement of the government to meet the expenditure other than the interest payment on earlier loans.


Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
caricature
view all courses
RELATED QUESTIONS :

If real income toEconomics - Board Papers

What are capital Economics - Board Papers

What are revenue Economics - Board Papers