Why should revenue deficit be curbed?
Why should revenue deficit be curbed?
Revenue deficit often occurs when unproductive expenditure of the government (like expenditure on subsidies and purchases relating to law & order and defence of the country) is in excess of the tax and non-tax revenue receipts. Thus, it contributes to the fiscal deficit without adding much to the flow of goods and services in the economy. Revenue deficit compels the government to resort to borrowing or disinvestment to cover up the deficit.
Borrowing leads to a rise in national debt. Disinvestment leads to transfer of asset ownership from the public sector to the private sector. It implies a shift in focus from social welfare to profit maximisation. Thus, we conclude that revenue deficit should be curbed.
Revenue deficit often occurs when unproductive expenditure of the government (like expenditure on subsidies and purchases relating to law & order and defence of the country) is in excess of the tax and non-tax revenue receipts. Thus, it contributes to the fiscal deficit without adding much to the flow of goods and services in the economy. Revenue deficit compels the government to resort to borrowing or disinvestment to cover up the deficit.
Borrowing leads to a rise in national debt. Disinvestment leads to transfer of asset ownership from the public sector to the private sector. It implies a shift in focus from social welfare to profit maximisation. Thus, we conclude that revenue deficit should be curbed.
