When a government spends more than it collects by way of revenue, it incurs a budget decit. There are various measures that capture government decit and they have their own implications for the economy. The important concepts of decits are discussed below.
1. Revenue Deficit:
The revenue deficit refers to the excess of government’s revenue expenditure over revenue receipts.
2. Fiscal Deficit:
Fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding borrowing. Gross fiscal deficit = Total expenditure –(Revenue receipts + Non-debt creating capital receipts
(Revenue receipts + Non-debt creating capital receipts)
3. Primary Deficit:
We must note that the borrowing requirement of the government includes interest obligations on accumulated debt. To obtain an estimate of borrowing on account of current expenditures exceeding revenues, we need to calculate what has been called the primary deficit. It is simply the fiscal deficit minus the interest payments. Gross primary deficit = Gross fiscal deficit – net interest liabilities.
