Question

The excess of total expenditure of Government over its total receipts, excluding borrowings, is known as
1. Primary deficit
2. Fiscal deficit
3. Current deficit
4. Capital deficit

Answer 1

Correct Answer - Option 2 : Fiscal deficit

The correct answer is Fiscal deficit.

• Fiscal Deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure.
• A recurring high fiscal deficit means that the government has been spending beyond its means.
• The government meets the fiscal deficit by borrowing money. In a way, the total borrowing requirements of the government in a financial year are equal to the fiscal deficit in that year.
• A fiscal deficit situation occurs when the government’s expenditure exceeds its income.
• This difference is calculated both in absolute terms and also as a percentage of the Gross Domestic Product (GDP) of the country.
• Fiscal Deficit formula:
  • ​Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts)

• Constitutes the government’s total income or receipts:​
• Revenue receipts of the government:
  • ​Corporation Tax.
  • Income Tax.
  • Custom Duties.
  • Union Excise Duties.
  • GST and taxes of Union territories.
• Non-tax revenues:
  • ​Interest Receipts.
  • Dividends and Profits.
  • External Grants.
  • Other non-tax revenues.
  • Receipts of union territories.
• Expenditures of the government:
  • ​Revenue Expenditure.
  • Capital Expenditure.
  • Interest Payments.
  • Grants-in-aid for creation of capital assets.