Q.Distinguish between revenue deficit, fiscal deficit and primary deficit, and discuss the significance of the fiscal deficit for the economy.

A deficit budget is one where government expenditure exceeds government revenue, the gap being met by borrowing.

Explanation

A government budget is an annual statement of the estimated receipts and expenditure of the government. When the estimated expenditure of the government is more than its estimated revenue, the budget is called a deficit budget. The excess of expenditure over revenue is known as the budget deficit and is financed by public borrowing, use of past reserves, or creation of new money. A deficit budget is generally recommended during a depression or recession, because increased government spending raises agg …

A budget is the government's annual statement of its estimated income (receipts) and expenditure for a financial year. It shows planned revenue and spending and may be balanced, surplus or deficit. It is divided into a revenue budget and a capital budget.

Meaning

The word budget comes from a term meaning a small bag. In public finance, the budget is the annual financial statement presented by the government, showing the estimated receipts and estimated expenditure for the coming financial year (in India, from 1 April to 31 March).

Components

The budget has two main parts:

• Revenue budget: Deals with the revenue receipts (tax and non-tax revenue) and revenue expenditure of the government.
• Capital budget: Deals with capital receipts (such as borrowings and recoveries of loans) and capital expenditure (such as spending on assets and development projects).

Types of budget

On the basis of the relation between receipts and expenditure, a budget may be:

• Balanced budget: Estimated receipts are equal to estimated expenditure.
• Surplus budget: Estimated receipts are greater than estimated expenditure. …

A deficit budget is a government budget in which estimated expenditure exceeds estimated revenue for the year, leaving a gap (deficit) that must be met by borrowing or by using past reserves. It is often used deliberately to raise demand and employment during a depression.

Meaning

A government budget is an annual statement of the estimated receipts and expenditure of the government. On the basis of the relation between the two, a budget may be balanced, surplus or deficit.

A deficit budget is one in which the estimated total expenditure of the government is more than its estimated total revenue, that is:

Deficit Budget: Estimated Expenditure is greater than Estimated Revenue.

The excess of expenditure over revenue is the budget deficit, which the government finances by borrowing (from the public, banks or the central bank) or by drawing down its reserves.

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