Question

In India’s Union Budget, Fiscal deficit means

1. Difference between current expenditure and current revenue.
2. The difference between total revenue and total expenditure of the government.
3. Sum of monetized deficit and budgetary deficit
4. Net increase in Union Government’s borrowing from the Reserve Bank of India,

Answer 1

Correct Answer - Option 2 : The difference between total revenue and total expenditure of the government.

The correct answer is The difference between total revenue and total expenditure of the government.

• The central government accounts are divided mainly into two parts- Revenue Account and Capital Account.
• The revenue account consists of revenue receipts and revenue expenditure.
• The capital account consists of capital payments and capital expenditure.
• Fiscal Deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure.
• It is calculated both in absolute terms and as a percentage of the country’s gross domestic product (GDP).
• The fiscal deficit calculations are based on two components - income and expenditure.
• A high deficit at times also emerges if the government is spending on developmental works like construction of highways, ports, roads, airports which will later generate revenue for the government.
• The Union Budget estimated a central fiscal deficit of 9.5 per cent (10.2 including off-budget borrowing) of GDP in 2020-21 and 6.8 per cent (7 including off-budget) for 2021-22.