Distinguish between revenue deficit and fiscal deficit.
Revenue deficit When the revenue receipts are less than the revenue expenditures in government budget, this shortfall of receipts is known as revenue deficit.
Revenue Deficit = Revenue Expenditure - Revenue Receipts The main implications of revenue deficit are:
(i) High revenue deficit leads to inflationary situation in the . economy.
(ii) High revenue deficit implies high future burden of loan and interest payments on government.
Fiscal deficit It is the excess of the total expenditure, i.e. revenue and capital expenditure, over the total receipts (excluding borrowings).
Fiscal Deficit = Total Budget Expenditure - Total Budget Receipts (excluding borrowings)
Fiscal deficit indicates the following situations in an economy:
(i) High borrowing requirements of government.
(ii) High interest payments of government.
(iii) Increased foreign dependence of the economy.