Fiscal Deficit is the difference between a government’s total expenditure and its total revenue (excluding borrowings). It represents the total borrowing requirement of the government.
- Calculation
- Foscal Deficit = Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts)
- Economic Implications
- High deficits can lead to “Crowding Out” (reducing capital available for private investment), inflationary pressure, or a “Debt Trap” where a majority of revenue is consumed by interest payments.
Revenue Deficit
It refers to the excess of total revenue expenditure of the government over its total revenue receipts.
- Calculation
- Revenue deficit = Total Revenue expenditure – Total Revenue receipts.
OR
-
- Revenue deficit = Total Revenue expenditure – (Tax Revenue + Non-Tax Revenue)
Source: The Hindu