Question

Which of the following formulas correctly defines the Fiscal Deficit?

Options

• \[ \text{Fiscal Deficit} = \text{Revenue Expenditure} - \text{Revenue Receipts} \]

• \[ \text{Fiscal Deficit} = \text{Total Receipts} - \text{Total Expenditure} \]

• \[ \text{Fiscal Deficit} = \text{Total Expenditure} - (\text{Tax Revenues} + \text{Interest Payments}) \]

• \[ \text{Fiscal Deficit} = \text{Total Expenditure} - (\text{Revenue Receipts} + \text{Non-Debt Creating Capital Receipts}) \]

Answer 1

The Fiscal Deficit equals Total Expenditure minus the sum of Revenue Receipts and Non-Debt Creating Capital Receipts. Only receipts that do not create debt are deducted, because the remaining gap must be met by borrowing — which is precisely what the fiscal deficit captures.