Question

The fiscal deficit in the economy will be zero if there is no provision for borrowings in the budget.

• A. True
• B. False

Answer 1

The correct option is A True

Fiscal deficit, estimated as the difference between total expenditure and total receipts, is often termed as gross fiscal deficit. As there are three sources of borrowing for the government, gross fiscal deficit is also estimated as the sum total of borrowing from RBI, borrowing from abroad and net borrowing at home. Hence, borrowings are equivalent to fiscal deficit and fiscal deficit will be zero if there is no provision for borrowings in the budget.