Question

Give the relationship between the revenue deficit and the fiscal deficit.

Answer 1

The relationship between the revenue deficit and the fiscal deficit can be explained through the following points:

1. Revenue deficit is the difference between government’s revenue expenditures and government’s receipts.

Revenue deficit = Revenue expenditures − Revenue receipts

On the other hand, fiscal deficit is the difference between the total expenditure and the total receipt of the government.

Fiscal deficit = Total Expenditure − Total Receipts (excluding borrowings)

2. The term ‘fiscal deficit’ is used in a broader sense than the term ‘revenue deficit’.

3. As revenue deficit increases, the proportion of fiscal deficit also increases.