Question

class 12 economics, chapter government budget, which type of deficit is more dangerous and why?​

Answer 1

Answer:

(i) Revenue deficit

(ii) Fiscal deficit and(iii) Primary deficit.Revenue deficit is excess of total revenue expenditure of the government over its total revenue receipts. It is related to only revenue expenditure and revenue receipts of the government. Alternatively, the shortfall of total revenue receipts compared to total revenue expenditure is defined as revenue deficit.

Revenue deficit signifies that government’s own earning is insufficient to meet normal functioning of government departments and provision of services. Revenue deficit results in borrowing. Simply put, when government spends more than what it collects by way of revenue, it incurs revenue deficit. Mind, revenue deficit includes only such transactions which affect current income and expenditure of the government. Put in symbols:

Revenue deficit = Total Revenue expenditure – Total Revenue receipts

For instance, revenue deficit in government budget estimates for the year 2012-13 is Rs 3,50,424 crore (= Revenue expenditure Rs 12,86,109 crore – Revenue receipts ^ 9,35,685 crore) vide summary of the budget in Section 9.18. It reflects government’s failure to meet its revenue expenditure fully from its revenue receipts.

The deficit is to be met from capital receipts, i.e., through borrowing and sale of its assets. Given the same level of fiscal deficit, a higher revenue deficit is worse than lower one because it implies a higher repayment burden in future not matched by benefits via investment.