Complete the formula:
Gross Fiscal Deficit = Total Expenditure – (Revenue receipts + ?)
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Non-debt creating capital receipts
The fiscal deficit shows how much the government must borrow. It is total expenditure minus all receipts that are not borrowings. Revenue receipts are not borrowings. Among capital receipts, only the non-debt creating ones are not borrowings, for example recovery of loans and the sale of shares in public sector units. So the formula is:
Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts)
Option (1) Capital receipts — Incorrect. Capital receipts include borrowings. Taking them away would remove the very borrowing the fiscal deficit is meant to show.
Option (2) Debt creating Capital receipts — Incorrect. These are the borrowings; the fiscal deficit is the gap they fill.
Option (3) Non-debt creating capital receipts — Correct. They are capital receipts that create no debt.
Option (4) Recovery of loans — Incorrect. This is only one non-debt creating receipt. It leaves out the sale of public sector shares.
NCERT (2026-27): “Fiscal Deficit: Fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding borrowing Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts) Non-debt creating capital receipts are those receipts which are not borrowings and, therefore, do not give rise to debt. Examples are recovery of loans and the proceeds from the sale of PSUs.… …The fiscal deficit will have to be financed through borrowing. Thus, it indicates the total borrowing requirements of the government from all sources.…” |