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Difficulty: EasyEconomic Developments, Union & State Budgets, and Economic Surveys

In the context of public finance and Union Budget accounting in India, which of the following statements accurately defines the term 'Fiscal Deficit'?

  1. The excess of total budget expenditure over total budget receipts, excluding borrowings.Answer
  2. B
    The difference between total revenue expenditure and total revenue receipts.
  3. C
    The fiscal deficit of the current year minus interest payments on previous borrowings.
  4. D
    The net difference between capital receipts and capital expenditure including external commercial borrowings.

Answer

Fiscal Deficit is defined as the excess of total budget expenditure over total budget receipts, excluding borrowings.
Fiscal Deficit indicates the total borrowing requirements of the government during a fiscal year. It is calculated as total expenditure minus total receipts excluding borrowings (non-debt receipts).

Step-by-Step Solution

1
Identify total budget expenditure
Total Expenditure = Revenue Expenditure + Capital Expenditure
Fiscal deficit considers the full budget outlay across both accounts.
2
Calculate total non-debt budget receipts
Non-Debt Receipts = Revenue Receipts + Non-Debt Capital Receipts (such as loan recoveries and disinvestment proceeds)
Borrowings must be excluded from receipts to evaluate the actual deficit to be financed.
3
Subtract non-debt receipts from total expenditure
Fiscal Deficit = Total Expenditure - Non-Debt Receipts
This formula yields the net debt created by the government during the fiscal year.

Key Concept

Fiscal Deficit and Budgetary Deficit Metrics
Estimated Time:45s
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Topics

Economic Developments, Union & State Budgets, and Economic Surveys

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