What is Fiscal Deficit

What is Fiscal Deficit?

The fiscal deficit is the difference between the government's total expenditure and its

total receipts (excluding borrowing). The elements of the fiscal deficit are (a) the revenue deficit, which is the difference between the government’s current (or revenue) expenditure and total current receipts (that is, excluding borrowing) and (b) capital expenditure. The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market, that is mainly from banks). The government's revenue receipts consists of its tax revenues (net of the share of the states) and non-tax revenues like

interest on loan given to states, dividends and interest paid by public sector firms etc.