Deficits

Deficits

In a budget statement, there is a mention of four types of deficits : (a) revenue, (b) budget, (c) fiscal, and (d) primary.

Revenue Deficit

Revenue Deficit refers to the excess of revenue expenditure over revenue receipts. [In fact, it reflects one crucial fact : what is the government borrowing for ? As an individual if you are borrowing to play the house rent, then you are in a situation of revenue deficit, i.e. while you are borrowing and spending, you are not creating any durable asset. This implies that there will be a repayment obligation (sometime in the future) and at the same time there is no asset creation via investment.]

Revenue Deficit = Total Revenue Expenditure - Total Revenue Receipts
= Non-plan Expenditure + Plan Expenditure - (net tax revenue + non tax revenue)

Budget Deficit

Budget Deficit refers to the excess of total expenditure over total receipts. Here, total receipts include current revenue and net internal and external capital receipts of the government.

Budget Deficit = Total Expenditure — Total Receipts
= (non-plan expenditure + plan expenditure) — (Revenue Receipts + Capital Receipts)

Fiscal Deficit

Fiscal Deficit refers to the difference between total expenditure (revenue, capital, and loans net of repayment) on one hand; and on the other hand, revenue receipts plus all those capital receipts which are not in the form of borrowings but which in the end accrue to the government.

Fiscal Deficit = Revenue Receipts (net tax revenue + non-tax revenue) + Capital Receipts (only recoveries of loans and other receipts) - Total Expenditure (plan and non-plan)

Primary Deficit

Primary Deficit refers to fiscal deficit minus interest payments. In other words, it points to how much the government is borrowing to pay for expenses other than interest payments. Also, it underscores another key fact : how much the government is adding to future burden (in terms of repayment) on the basis of past and present policy.

Primary Deficit = Revenue Deficit — Interest Payments
Monetised Deficit = Increment in Net RBI Credit to the Central Government