Budget Deficit: Meaning and the Revenue Deficit

When a government's total expenditure exceeds its total receipts in a given year, the budget is said to be in deficit. Rather than a single number, Indian budget documents (and the Gujarat Std 11 Economics syllabus) study three distinct deficit measures, each answering a different question about the government's finances. This section covers the first and simplest.

Revenue Deficit is the excess of revenue expenditure over revenue receipts:

A revenue deficit means the government is unable to meet even its normal, day-to-day running expenses out of its normal current income — it must borrow, or run down assets, just to cover routine spending like salaries, interest, and subsidies. This is considered an especially undesirable form of deficit, because unlike capital expenditure, revenue expenditure creates no productive asset in return; borrowing to finance it is, in effect, borrowing merely to consume, with nothing built to show for it and no future income stream to help repay the loan. …