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Question

What is fiscal deficit? Can there be fiscal deficit without revenue deficit?

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Solution

Fiscal deficit is equal to the excess of all expenditures (capital and revenue) over the sum of revenue and capital receipts, excluding borrowings. There can be a fiscal deficit without the revenue deficit. It can be explained as follows:

(a) When revenue receipts are equal to revenue expenditure i.e., balanced revenue budget but capital expenditure is more than capital receipts.

(b) When revenue receipts are greater than revenue expenditures i.e., surplus revenue budget but capital expenditure is more than capital receipts and the deficit in the capital budget is more than the surplus in revenue budget.


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