Question

Explain the concepts of 'Revenue deficit', 'Fiscal deficit' and 'Primary deficit'.

Hint:

\[\begin{array}{rl} \bullet & \text{Revenue Deficit: Revenue Receipts < Revenue Expenditure} \\ \bullet & \text{Fiscal Deficit: Total Expenditure > Total Revenue} \\ \bullet & \text{Primary Deficit: Fiscal Deficit - Interest Payments} \\ \end{array}\]

Answer 1

• Revenue Deficit: This refers to the difference between the government's total revenue (excluding borrowings) and its total expenditure (excluding capital expenditure). A revenue deficit indicates that the government is borrowing to meet its day-to-day operational expenses.
• Fiscal Deficit: The fiscal deficit is the difference between the total expenditure and total revenue (including borrowings). It shows the total borrowing requirements of the government.
• Primary Deficit: The primary deficit is the fiscal deficit minus the interest payments made by the government. It shows how much the government is borrowing to meet its current expenditures excluding interest costs.