Question

Identify the correct statement:

• A. Revenue deficit includes capital receipts.
• B. Fiscal deficit is the difference between total expenditure and total receipts excluding borrowings.
• C. Primary deficit includes interest payments.
• D. Tax is a non-debt creating capital receipt.

Hint:

Key Formulas: Fiscal Deficit = Total Expenditure $-$ Revenue Receipts $-$ Non-debt Capital Receipts. Primary Deficit = Fiscal Deficit $-$ Interest Payments.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Government budget deficits reflect the gap between expenditures and receipts. Each deficit type focuses on a different aspect of the budget.
Step 2: Detailed Explanation:
(A) Incorrect: Revenue Deficit = Revenue Expenditure - Revenue Receipts. It doesn't include capital components.
(B) Correct: Fiscal Deficit is the total borrowing requirement of the government. It is calculated as: Total Expenditure - (Revenue Receipts + Non-Debt Capital Receipts). This is exactly "Total Receipts excluding borrowings".
(C) Incorrect: Primary Deficit = Fiscal Deficit - Interest Payments. It excludes interest payments to show the current year's fiscal stance.
(D) Incorrect: Tax is a Revenue Receipt, not a capital receipt.
Step 3: Final Answer:
Statement (B) is the textbook definition of Fiscal Deficit.