Question
The fiscal Deficit is equal to:
Select the correct answer using the code given below:
- Total expenditure minus total receipts
- Total expenditure minus total receipts excluding borrowing
- Revenue deficit plus capital expenditure minus non-debt creating capital receipts
- Total borrowing
Select the correct answer using the code given below:
Answer: Option B
Answer: (b)
Fiscal Deficit = Total Expenditure - Total Receipts except borrowing
= (Rev Exp. + Cap Exp.) - (Rev Rec. + Cap Rec. except borrowing)
= (Rev Exp. - Rev Rec.) + (Cap Exp. - Cap Rec. except borrowing)
= Revenue Deficit + Cap Exp. - Cap Rec. except borrowing
= Total borrowing
= Net borrowing at home + borrowing from RBI + Borrowing from abroad
Let us understand with an example.
Suppose, government's total expenditure = 17 lakh crore and receipts = 13 lakh crore
Then the government will have to borrow (17 lakh crore -13 lakh crore) 4 lakh crore to meet its expenditure. And this 4 lakh crore is called the fiscal deficit. That is why the fiscal deficit is also equal to the total borrowing i.e. 4 lakh crore.
But this 4 lakh crore which government borrows becomes part of capital receipt for the government and it must be included in capital receipts. So, in the actual sense government's total receipts will become 17 lakh crore (i.e. 13 lakh crore + 4 lakh crore borrowing).
Hence, in the above example:
Fiscal Deficit = Total expenditure - total receipts except borrowing
Otherwise, the difference between total expenditure and total receipts will always be zero.
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Answer: (b)
Fiscal Deficit = Total Expenditure - Total Receipts except borrowing
= (Rev Exp. + Cap Exp.) - (Rev Rec. + Cap Rec. except borrowing)
= (Rev Exp. - Rev Rec.) + (Cap Exp. - Cap Rec. except borrowing)
= Revenue Deficit + Cap Exp. - Cap Rec. except borrowing
= Total borrowing
= Net borrowing at home + borrowing from RBI + Borrowing from abroad
Let us understand with an example.
Suppose, government's total expenditure = 17 lakh crore and receipts = 13 lakh crore
Then the government will have to borrow (17 lakh crore -13 lakh crore) 4 lakh crore to meet its expenditure. And this 4 lakh crore is called the fiscal deficit. That is why the fiscal deficit is also equal to the total borrowing i.e. 4 lakh crore.
But this 4 lakh crore which government borrows becomes part of capital receipt for the government and it must be included in capital receipts. So, in the actual sense government's total receipts will become 17 lakh crore (i.e. 13 lakh crore + 4 lakh crore borrowing).
Hence, in the above example:
Fiscal Deficit = Total expenditure - total receipts except borrowing
Otherwise, the difference between total expenditure and total receipts will always be zero.
Was this answer helpful ?
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