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.
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