Why should revenue deficit be curbed ?
Answers
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If a business or government has a revenue deficit that means its income isn't enough to cover its basic operations. When that happens, it may make up for the revenue it needs to cover by borrowing money or selling existing assets. To remedy a revenue deficit, a government can choose to raise taxes or cut expenses.
Use of capital receipts for meeting the extra consumption expenditure leads to an inflationary situation in the economy Higher borrowings increase the future burden in terms of loan amount and interest payments.
. A high revenue deficit gives a warning signal to the government to either curtail its expenditure or increase its revenue.
According to far-sighted approach, revenue receipts should always be more than revenue expenditures so that surplus can be used for development projects. However, Indian Budget is facing revenue deficit for the past several years.