A revenue deficit arises when the government's revenue expenditure exceeds its revenue receipts in a financial year. In plain terms, the government's regular, day-to-day income falls short of its day-to-day spending.

How it works

The budget splits into a revenue account and a capital account. The revenue account covers recurring, non-asset items:

• Revenue receipts — receipts that neither create a liability nor reduce an asset (tax revenue, interest, fees, dividends).
• Revenue expenditure — spending that neither creates an asset nor reduces a liability (salaries, pensions, interest payments, subsidies).

When the second exceeds the first, the government runs a revenue deficit — it consumes more than it earns on current account.

Quick example

A government reports: tax revenue ₹500, interest & fees ₹150 (revenue receipts); salaries, subsidies and interest payments ₹800 (revenue expenditure) — all in crore. It also has capital items (loan recoveries, asset sales) which are ignored here.

1. Revenue receipts = 500 + 150 = ₹650 crore
2. Revenue expenditure = ₹800 crore …