Question

Answer the following question.
What is meant by revenue deficit? Explain its implications.

Answer 1

Revenue deficit is concerned with the revenue expenditures and revenue receipts of the government. It refers to an excess of revenue expenditure over revenue receipts during the given fiscal year.

Revenue Deficit = Revenue Expenditure – Revenue Receipts

Implications of Revenue Deficit:

1. It indicates the inability of the government to meet its regular and recurring expenditure in the proposed budget.

2. It implies that the government is dissaving, i.e. the government is using up savings of other sectors of the economy to finance its consumption expenditure.