Fiscal deficit is the difference between the total expenditure and the sum of revenue and’ capital receipts excluding borrowings. Thus,

Fiscal deficit = Total budgetary expenditure – Revenue Receipts – Capital Receipts (excluding borrowings)

Implication: It has serious implication for the economy. Government has to borrow to meet this deficit, increasing future liability in the form of interest payment and repayment of loans. Payment of interest increases revenue expenditure, increasing the revenue deficit and thus leading to more borrowings and more interest payments. Hence, it is important to reduce the fiscal deficit for avoiding ‘debt trap’ and smooth functioning of the economy.

Primary deficit refers to the difference between fiscal deficit and interest payments. Thus, 

Primary deficit = Fiscal deficit – Interest payments. 

Implication: It indicates the real position of the government finances as it excludes the interest burden in respect of loans taken in the past, showing how much the government is borrowing to meets its expenses other than interest payments. It is a measure of the fiscal discipline of the government.

Revenue deficit denotes the difference between the revenue receipts and revenue expenditure. Thus,

Revenue deficit = Revenue Expenditure – Revenue Receipts. 

Implication: It indicates the government’s current financial status. In India, the deficit on revenue account is very high. Revenue deficit means dissaving on government account which imposes a burden on the future generations because they have to bear the pinch of the interest burden.