Question

Fiscal deficit refers to the

• A. final revenue deficit of the government
• B. actual deficit of the government
• C. deficit related to non-tax revenue
• D. none of these

Hint:

Fiscal deficit is total spending minus receipts other than borrowing, so it shows the government's real overall borrowing need.

Answer 1

The Correct Option is B

Step 1: Understanding the Question:
We need to pin down exactly what the term fiscal deficit means in government budgeting.

Step 2: Key Formula or Approach:
Fiscal deficit is defined as the gap between the government's total expenditure and its total revenue excluding borrowings. In formula form:
\( \text{Fiscal Deficit} = \text{Total Expenditure} - \text{Total Receipts excluding borrowings} \)
This gap tells us the total amount the government actually needs to borrow in a year, so it is described as the government's actual, overall deficit.

Step 3: Detailed Explanation:
Revenue deficit, by contrast, only measures the gap between revenue expenditure and revenue receipts, and does not capture borrowing needed for capital spending, so option (1) describes a narrower and different concept.
Fiscal deficit is not limited to non-tax revenue alone, it covers the government's entire expenditure against all its receipts except borrowings, so option (3) is too narrow and wrong.
Since fiscal deficit does represent the actual overall borrowing requirement of the government, option (2) correctly captures its meaning, and option (4), none of these, does not apply.

Step 4: Final Answer:
Fiscal deficit refers to the actual deficit of the government, so the answer is option (2).