Fiscal Deficit, Revenue Deficit, Budget Deficit in layman terms

There are a few terms in Indian Economy, which are often asked in UPSC Civil Services Prelims as well as the Main examination. These terms are given below.

What is fiscal deficit?

A fiscal deficit is a difference between the government’s expenditures and its revenues (excluding the money it’s borrowed). A country’s fiscal deficit is usually communicated as a percentage of its gross domestic product (GDP).

What is a revenue deficit?

Revenue deficit is the difference between the government’s net revenue amounts received and planned (budgeted or planned) net revenue amount. This happens when the actual amount of revenue received and/or the actual amount of expenditures do not correspond with predicted revenue and expenditure figures.

What is the difference between fiscal deficit and current account deficit?

A fiscal deficit is a percentage of the nation’s GDP and can be considered an economic event in which government expenditure exceeds its revenue. Meanwhile, a current account deficit occurs when the country’s imports are greater than the country’s exports of goods, services, and transfers.

Most developing countries run a short-term current account deficit to boost domestic production, which could lead to an increase in exports in the future.

What is the difference between fiscal deficit and budget deficit?

A budget deficit is commonly known as the national debt. A budget deficit means that a country has more money going out when compared to the money it is earning. A fiscal deficit is basically the difference between the money it spends and the money it makes.

Also read: Monetary Policy Committee of India

The Reserve Bank of India Monetary Policy Committee