RAS question
The fiscal deficit of the Government refers to:
Correct answer: (A) Total expenditure minus total receipts excluding borrowings.
Fiscal deficit is the difference between the government's total expenditure and its total receipts excluding borrowings.
Explanation
Fiscal deficit measures the gap left after the government compares its total expenditure with total receipts other than borrowings. The Controller General of Accounts defines fiscal deficit as the difference between total expenditure and total receipts, excluding borrowing. That exclusion is central to the definition of fiscal deficit. Borrowing is not counted as an ordinary receipt for finding the deficit; it is the way the deficit is financed. Fiscal deficit can be financed through borrowing from the Reserve Bank of India and market borrowing. Fiscal deficit is best understood as the government's total borrowing requirement arising from the excess of expenditure over non-borrowed receipts. India's Budget first introduced this measure in 1991-92 on the recommendation of the Committee on Fiscal Responsibility.
Why the other options are wrong
- (B) Revenue expenditure minus revenue receipts gives revenue deficit, while fiscal deficit covers the wider gap between total expenditure and total receipts excluding borrowings.
- (C) Including borrowings treats the financing source as a receipt, whereas fiscal deficit is meant to show the borrowing need before that financing is added.
- (D) Capital expenditure minus capital receipts is a capital-side gap, not the government's overall fiscal deficit across total expenditure and non-borrowed receipts.
Concept
Basic budgetary deficits in Indian Economy include the distinction between fiscal deficit and revenue deficit. Fiscal deficit recurs in RAS because borrowing requirements, public finance and budget terminology are core to interpreting Union and State budgets.