Revenue deficit is the real deficit and not the fiscal deficit. How?

1.	Revenue deficit is the real deficit and not the fiscal deficit. How?
Answer» 1. Fiscal deficit is defined as excess of total expenditure over total receipts (revenue and capital receipts) excluding borrowing. 2. In other words, it is equal to borrowings and borrowings are just an act of the government which may be finance interest payments of the government also. 3. While revenue deficit exclusively takes into account current interest payment obligations of the government not connected with the actual activities. 4. Thus, revenue deficit is more important than fiscal deficit.

Answer»

1. Fiscal deficit is defined as excess of total expenditure over total receipts (revenue and capital receipts) excluding borrowing.

2. In other words, it is equal to borrowings and borrowings are just an act of the government which may be finance interest payments of the government also.

3. While revenue deficit exclusively takes into account current interest payment obligations of the government not connected with the actual activities.

4. Thus, revenue deficit is more important than fiscal deficit.

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