Question

Fiscal deficit in a government budget refers to

• A. Shortfall in taxes
• B. Disinvestment requirement
• C. Shortfall in disinvestment
• D. Borrowing

Hint:

Fiscal deficit = Total Expenditure minus non-borrowed receipts = the government's borrowing need.

Answer 1

The Correct Option is D

Step 1: Understanding the Question:
Fiscal deficit is defined as Total Expenditure minus Total Receipts excluding borrowings.

Step 2: Why option D is correct:
Since the deficit is calculated by excluding borrowed money from receipts, the resulting gap is exactly the amount the government must borrow to finance its spending — so fiscal deficit is a direct measure of the government's borrowing requirement.

Step 3: Why option A is wrong:
A tax shortfall is only one possible component of the revenue side; fiscal deficit is a broader measure covering the whole gap between spending and non-borrowed receipts, not taxes alone.

Step 4: Why option B is wrong:
Disinvestment (selling government stakes in PSUs) is itself a capital receipt included on the receipts side; the fiscal deficit is not defined as a "requirement" for disinvestment.

Step 5: Why option C is wrong:
A shortfall specifically in disinvestment proceeds is far narrower than the fiscal deficit, which covers the entire expenditure-receipts gap.

Final Answer:
Fiscal deficit refers to the government's borrowing requirement.