A Budgetary Deficit can be termed as the excess of the total government expenditure over the total revenue generated in a financial year. A budgetary deficit happens when the government spends more money than what is generated through revenue collection, including direct or indirect taxes. Based on the deficit incurred, has been divided into three forms, i.e., Revenue Deficit, Fiscal Deficit, and Primary Deficit.
Fiscal Deficit
The fiscal deficit refers to the excess of total expenditure over total receipts/income, excluding borrowings, in a fiscal year. It mainly focuses on the borrowings of the government. It is mainly used to explain and understand the budgetary development in India. Fiscal Deficits happen when the government spends more than it is supposed to.
Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings)
OR
= (Revenue Expenditure + Capital Expenditure) – (Revenue Receipts + Capital Receipts excluding Borrowings)
OR
= (Revenue Expenditure – Revenue Receipts) + (Capital Expenditure – Capital Receipts excluding Borrowings)
OR
= Revenue Deficit + (Capital Expenditure – Capital Receipts excluding Borrowings)
Revenue Deficit
The revenue deficit refers to the excess of revenue expenditure over revenue income in a financial year. It mainly focuses on the revenue aspects of the government, like revenue expenditure and revenue income/receipts. Revenue deficits happen due to the insufficiency of the government’s funds to meet the expenditure.
Revenue Deficit = Revenue Expenditure – Revenue Receipts
Difference between Fiscal Deficit and Revenue Deficit
| Basis | Fiscal Deficit | Revenue Deficit |
|---|---|---|
| Meaning | It is the excess of total expenditure over total receipts/income, excluding borrowings, in a fiscal year. | It is the excess of revenue expenditure over revenue income in a financial year. |
| Indicator | Fiscal Deficit measures the government’s total borrowing requirements. | Revenue Deficit indicates government’s inability to meet its recurring and regular expenditures. |
| Borrowing | Fiscal Deficit shows the extent of government’s borrowing when the interest on payment is accounted for. | Revenue Deficit shows the borrowing needs of the government to manage its budgetary expenditure. |
| Represents | Fiscal Deficit represents the additional financial resources required by the government to meet its expenditure. | Revenue Deficit represents government’s dissavings. |
| Occurs When | Fiscal Deficit occurs when the government spends more than it earns or beyond its resources. | Revenue Deficit occurs in an economy when the realised income is less than the projected/expected income. |
| Formula | Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings) | Revenue Deficit = Revenue Expenditure – Revenue Receipts |
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