Fiscal Policy and Revenue (Part – II)

41. Consider the following budget deficits of Central Government: [U.P. Lower Sub. (Spl.) (Pre) 2002,2003]

1. Primary deficit

2. Fiscal deficit

3. Revenue deficit

The correct descending order of their values is:

Code:

(a) 2, 3, 1
(b) 1, 2, 3
(c) 2, 1, 3
(d) 3, 2, 1

Correct Answer: (a) 2, 3, 1

Solution:The correct descending order of the values of given deficits is as follows:

Fiscal deficit>Revenue deficit>Primary deficit

The recent trends of deficits in the Union Budget is presented in the following table:

Deficit Statistics In Rs. crores

Deficit

2022-23

(Actuals)

2023-24

(B.E.)

2023-24

(R.E.)

2024-25

(B.E.)

Fiscal Deficit

1737755

(6.4%)

1786816

(5.9%)

1734773

(5.8%)

1685494

(5.1%)

Revenue Deficit

1069926

(3.9%)

869855

(2.9%)

840527

(2.8%)

653383

(2.0%)

Primary Deficit

809238

(3.0%)

706845

(2.3%)

679346

(2.3%)

495054

(1.5%)

Note : Figures in parenthesis are as a percentage of GDP

42. Which one of the following forms the largest shar deficit in Government of India budget?

Correct Answer: (b) Fiscal deficit

Solution:

Deficit Statistics In Rs. crores

Deficit

2022-23

(Actuals)

2023-24

(B.E.)

2023-24

(R.E.)

2024-25

(B.E.)

Fiscal Deficit

1737755

(6.4%)

1786816

(5.9%)

1734773

(5.8%)

1685494

(5.1%)

Revenue Deficit

1069926

(3.9%)

869855

(2.9%)

840527

(2.8%)

653383

(2.0%)

Primary Deficit

809238

(3.0%)

706845

(2.3%)

679346

(2.3%)

495054

(1.5%)

Note : Figures in parenthesis are as a percentage of GDP

43. As compared to revenue deficit, fiscal deficit will remain: [U.P.P.C.S. (Mains) 2008]

(a) Higher
(b) Lower
(c) Same
(d) All the above

Correct Answer: (a) Higher

Solution:

Deficit Statistics In Rs. crores

Deficit

2022-23

(Actuals)

2023-24

(B.E.)

2023-24

(R.E.)

2024-25

(B.E.)

Fiscal Deficit

1737755

(6.4%)

1786816

(5.9%)

1734773

(5.8%)

1685494

(5.1%)

Revenue Deficit

1069926

(3.9%)

869855

(2.9%)

840527

(2.8%)

653383

(2.0%)

Primary Deficit

809238

(3.0%)

706845

(2.3%)

679346

(2.3%)

495054

(1.5%)

Note : Figures in parenthesis are as a percentage of GDP

44. Match List-I with List-II and select the correct answer using the codes given below the lists: [I.A.S (Pre) 2001]

List I (Term)	List II (Explanation)
A. Fiscal deficit	1. Excess of Total Expenditure over Total Receipts
B. Budget deficit	2. Excess of Revenue Expenditure over Revenue Receipts
C. Revenue deficit	3. Excess of Total Expenditure over Total Receipts less borrowings
D. Primary deficit	4. Excess of Total Expenditure over Total Receipts less borrowings and Interest Payments

Codes:

	A	B	C	D
(a)	3	1	2	4
(b)	4	3	2	1
(c)	1	3	2	4
(d)	3	1	4	2

(a)
(b)
(c)
(d)

Correct Answer: (a)

Solution:The excess of Government's total expenditure (both revenue and capital) over total receipts (both revenue and capital) constitutes budget deficit. From the 1997-98 Budget, the practice of showing budget deficit has been discontinued in India

The excess of Government's revenue expenditure over revenue receipts constitutes revenue deficit.

The difference between the total expenditure of Government by way of revenue, capital and loans net of repayments on the one hand and revenue receipts of Government and capital receipts which are not in the nature of borrowing but which accrue to Government on the other, constitutes gross fiscal deficit

Gross primary deficit is gross fiscal deficit reduced by the gross interest payments.

Note: In the Budget documents 'gross fiscal deficit' and 'gross primary deficit have been referred to in abbreviated form 'fiscal deficit and 'primary deficit, respectively.

In short,

Budget deficit Total expenditure-Total receipts

Revenue deficit= Revenue expenditure - Revenue receipts

Fiscal deficit =Total expenditure-Total income/revenue (Revenue receipts + Non-debt creating capital receipt)

=Total expenditure [Total receipts less borrowings (debt and other liabilities)]

=Budget deficit + Internal and external borrowings

Primary deficit Fiscal deficit-Interest payments

45. Fiscal deficit in the Union budget means: [I.A.S (Pre) 1994]

(a) the sum of budgetary deficit and net increase in internal and external borrowings
(b) the difference between current expenditure and comes
(c) the sum of monetized deficit and budgetary deficit
(d) net increase in Union Government's borrowings from the Reserve Bank of India

Correct Answer: (a) the sum of budgetary deficit and net increase in internal and external borrowings

Solution:The excess of Government's total expenditure (both revenue and capital) over total receipts (both revenue and capital) constitutes budget deficit. From the 1997-98 Budget, the practice of showing budget deficit has been discontinued in India

The excess of Government's revenue expenditure over revenue receipts constitutes revenue deficit.

The difference between the total expenditure of Government by way of revenue, capital and loans net of repayments on the one hand and revenue receipts of Government and capital receipts which are not in the nature of borrowing but which accrue to Government on the other, constitutes gross fiscal deficit

Gross primary deficit is gross fiscal deficit reduced by the gross interest payments.

Note: In the Budget documents 'gross fiscal deficit' and 'gross primary deficit have been referred to in abbreviated form 'fiscal deficit and 'primary deficit, respectively.

In short,

Budget deficit Total expenditure-Total receipts

Revenue deficit= Revenue expenditure - Revenue receipts

Fiscal deficit =Total expenditure-Total income/revenue (Revenue receipts + Non-debt creating capital receipt)

=Total expenditure [Total receipts less borrowings (debt and other liabilities)]

=Budget deficit + Internal and external borrowings

Primary deficit Fiscal deficit-Interest payments

46. Fiscal deficit is: [B.P.S.C. (Pre) 2008]

(a) Total expenditure-Total receipts
(b) Revenue expenditure - Revenue receipts
(c) Capital expenditure Capital receipts Market borrowings
(d) Sum of budget deficit and Govt's market borrowings

Correct Answer: (d) Sum of budget deficit and Govt's market borrowings

Solution:The excess of Government's total expenditure (both revenue and capital) over total receipts (both revenue and capital) constitutes budget deficit. From the 1997-98 Budget, the practice of showing budget deficit has been discontinued in India

The excess of Government's revenue expenditure over revenue receipts constitutes revenue deficit.

The difference between the total expenditure of Government by way of revenue, capital and loans net of repayments on the one hand and revenue receipts of Government and capital receipts which are not in the nature of borrowing but which accrue to Government on the other, constitutes gross fiscal deficit

Gross primary deficit is gross fiscal deficit reduced by the gross interest payments.

Note: In the Budget documents 'gross fiscal deficit' and 'gross primary deficit have been referred to in abbreviated form 'fiscal deficit and 'primary deficit, respectively.

In short,

Budget deficit Total expenditure-Total receipts

Revenue deficit= Revenue expenditure - Revenue receipts

Fiscal deficit =Total expenditure-Total income/revenue (Revenue receipts + Non-debt creating capital receipt)

=Total expenditure [Total receipts less borrowings (debt and other liabilities)]

=Budget deficit + Internal and external borrowings

Primary deficit Fiscal deficit-Interest payments

47. Fiscal deficit implies: [R.A.S/R.T.S.(Pre) 2013]

(a) Total expenditure (Revenue receipts + recovery of loans + receipts from disinvestment)
(b) Total expenditure - Total receipts
(c) Total expenditure-(Revenue receipts + receipts from disinvestment)
(d) Total expenditure - Disinvestment receipts

Correct Answer: (a) Total expenditure (Revenue receipts + recovery of loans + receipts from disinvestment)

Solution:Fiscal deficit is the difference between the government's total expenditure and its total receipts excluding borrowings.

Gross fiscal deficit = Total expenditure-(Revenue receipts + non-debt creating capital receipts).

Non-debt creating capital receipts include recovery of loans and the proceeds from the sale of PSUs (receipts from disinvestment).

48. Which of the following expression shows the formula of Gross Fiscal Deficit? [Raj. P.C.S. (Pre) 2023]

(a) Gross Fiscal Deficit - Primary Deficit + Net borrowing from abroad
(b ) Gross Fiscal Deficit Total Exp -Revenue Receipts
(c) Gross Fiscal Deficit = Revenue Deficit + Capital Expenditure
(d) Gross Fiscal Deficit Net borrowing at home Borrowing from RBI + Borrowing from abroad

Correct Answer: (d) Gross Fiscal Deficit Net borrowing at home Borrowing from RBI + Borrowing from abroad

Solution:The Gross Fiscal Deficit is the excess of total government expenditure over revenue receipts and capital receipts that do not create debt. The fiscal deficit will have to be financed through borrowing. Thus, it indicates the total borrowing requirements of the government. Hence, from the financing side

Gross Fiscal Deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad

49. In India's Union Budget, Fiscal deficit means: [Jharkhand P.C.S. (Pre) 2021]

(a) Net increase in Union Government's borrowing from the Reserve Bank of India
(b) Difference between current expenditure and current revenue
(c) The difference between total revenue and total expenditure of the government
(d) Sum of monetized deficit and budgetary deficit

Correct Answer: (c) The difference between total revenue and total expenditure of the government

Solution:Fiscal Deficit is the difference between the total income (revenue) of the government (total taxes and non-debt capital receipts) and its total expenditure. A fiscal deficit situation occurs when the government's expenditure exceeds its income. This difference is calculated both in absolute terms and also as a percentage of the Gross Domestic Product GDP) of the country. Hence, option (c) is the correct answer.

50. Assertion (A): Fiscal deficit is greater than budgetary deficit. [I.A.S (Pre) 1999]

Reason (R): Fiscal deficit is the borrowing from the Reserve Bank of India plus other liabilities of Government to meet its expenditure.

(a ) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true

Correct Answer: (a ) Both A and R are true and R is the correct explanation of A

Solution:Fiscal deficit is greater than budgetary deficit, because where budgetary deficit is a difference between total receipts and total expenditure of the Government, the fiscal deficit has been the difference between total income and total expenditure of the Government. Public debt and other liabilities are the receipts of Government but they are not income, because the government have responsibility to return them. Hence, fiscal deficit is greater than budgetary deficit.

Fiscal Policy and Revenue (Part – II)

41. Consider the following budget deficits of Central Government: [U.P. Lower Sub. (Spl.) (Pre) 2002,2003]

42. Which one of the following forms the largest shar deficit in Government of India budget?

43. As compared to revenue deficit, fiscal deficit will remain: [U.P.P.C.S. (Mains) 2008]

44. Match List-I with List-II and select the correct answer using the codes given below the lists: [I.A.S (Pre) 2001]

45. Fiscal deficit in the Union budget means: [I.A.S (Pre) 1994]

46. Fiscal deficit is: [B.P.S.C. (Pre) 2008]

47. Fiscal deficit implies: [R.A.S/R.T.S.(Pre) 2013]

48. Which of the following expression shows the formula of Gross Fiscal Deficit? [Raj. P.C.S. (Pre) 2023]

49. In India's Union Budget, Fiscal deficit means: [Jharkhand P.C.S. (Pre) 2021]

50. Assertion (A): Fiscal deficit is greater than budgetary deficit. [I.A.S (Pre) 1999]

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