Question

Describe the various types of deficit in the budget

Answer 1

The Indian Government budget, the budget deficit is of four major types.

1. Revenue Deficit
2. Budget Deficit
3. Fiscal Deficit, and
4. Primary Deficit

1. Revenue Deficit:
   It refers to the excess of the government revenue expenditure over revenue receipts. It does not consider capital receipts and capital expenditure. Revenue deficit implies that the government is living beyond its means to conduct day-to-day operations.
   Revenue Deficit (RD) = Total Revenue Expenditure (RE) – Total Revenue Receipts (RR) When RE – RR>0
2. Budget Deficit:
   The budget deficit is the difference between total receipts and total expenditure (both revenue and capital)
   Budget Deficit = Total Expenditure – Total Revenue
3. Fiscal Deficit:
   Fiscal deficit (FD) = Budget deficit + Government’s market borrowings and liabilities
4. Primary Deficit:
   Primary deficit is equal to fiscal deficit minus interest payments. It shows the real burden of the government and it does not include the interest burden on loans taken in the past. Thus, the primary deficit reflects the borrowing requirement of the government exclusive of interest payments.
   Primary Deficit (PD) = Fiscal deficit (PD) – Interest Payment (IP)