Question

difference between revenue deficit and capital deficit.​

Answer 1

Answer:

What is the difference between revenue deficit and fiscal deficit?

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I would like you to take a step back and understand the various accounts of the government. Government budget is divided into two accounts. One, Revenue Account - here the meaning of revenue is not same as in the income statement or earnings. Two, Capital Account.

Such division is made because not only it helps in understanding the government effectiveness in money matters but also that constitution of India mandate that such accounts be presented in front of the parliament see article 112 of the constitution of India.

Coming back to your question.

Revenue Account is further divided into receipt( like tax receipt) and expenditure (social sector scheme like Pradhan Manari Gram Sadak Yojana or Salaries of employees). Here

Revenue Account Deficit = Revenue Account Receipt - Revenue Account Expenditure

Capital Account is further divided into receipt ( like Loan recovery from state government or Market Borrowing) and expenditure (like Buying Defence Equipments)

Capital Account Deficit = Capital Account Receipt - Capital Account Expenditure

Now,

Overall Budget Deficit = Revenue Account Deficit + Capital Account Deficit

So where is Fiscal Deficit?

Earlier, the market borrowing by the government of India was not considered as a part of Government Budget then to finance this excess spending government used to borrow from the market, which was called deficit financing.

Earlier time overall budget deficit used to be positive, however since the market borrowing is also now included in the government budget the overall budget deficit will always be NIL.

Still where is Fiscal Deficit?

Fiscal Deficit = Revenue Account Receipt + Capital Account Receipt* - Revenue Account Expenditure - Capital Account Expenditure

Capital Account Receipt* - Here please read this carefully - > all the capital account receipt except the Market borrowing and liabilities of the government of India.

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Hope it helped (◕ᴗ◕✿)