4. Budgetary Deficits

When government expenditures exceed government tax revenues in a given year, the government is running a budget deficit for that year. When government expenditures are less than tax revenues in a given year, the government is running a budget surplus for that year. The budget surplus is the difference between tax revenues and government expenditures. In the case where government expenditures are exactly equal to tax revenues in a given year, the government is running a balanced budget for that year.

Various measures that capture government deficit and their implications for the economy are discussed below:

4.1. Revenue Deficit Revenue Deficit = Revenue Expenditure – Revenue Receipts 4.2. Fiscal Deficit Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts)The fiscal deficit will have to be financed through borrowing. Thus, it indicates the total borrowing requirements of the government from all sources. From the financing side Fiscal Deficit = Revenue Deficit + Capital Expenditure - non-debt creating capital receipts 4.3. Primary Deficit Gross primary deficit = Gross fiscal deficit – Net interest liabilities 4.4. Deficit Financing 4.4.1. Whether Government Debt is Good or Bad?4.4.2. Ricardian Equivalence 4.4.3. Debt vs Inflation 4.5. Deficit Reduction 4.5.1. Fiscal Responsibility and Budget Management Act, 2003 (FRBMA)Main Features 4.5.1.2. Lacunae in FRBM Act Major Recommendations of the NK Singh (FRBM Review) Committee