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Question:

Give the relationship between the revenue deficit and the fiscal deficit.

Answer:

The relationship between the revenue deficit and the fiscal deficit can be explained through the following points:

1. Revenue deficit is the difference between government’s revenue expenditures and government’s receipts.

Revenue deficit = Revenue expenditures - Revenue receipts
On the other hand, fiscal deficit is the difference between the total expenditure and the total receipt of the government.
Fiscal deficit = Total Expenditure - Total Receipts (excluding borrowings)

2. The term ‘fiscal deficit’ is used in a broader sense than the term ‘revenue deficit’.
3. As revenue deficit increases, the proportion of fiscal deficit also increases.


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