Determine Fiscal deficit from following :
Revenue Receipts = Rs 20 Crores
Revenue Expenditures = Rs 30 Crores
Capital Expenditure = Rs 40 Crores
Borrowings = Rs 15 Crores
Answer & explanation
Correct answer: option 1
The correct answer is option (1) : 15 Crores
Fiscal deficit is equal to borrowings because it represents the total amount of money that the government has borrowed to finance its expenditure. Borrowings are an important component of fiscal deficit as they allow the government to finance its expenses when its revenue receipts are not sufficient.
Fiscal Deficit = Borrowings
Fiscal Deficit = 15 Crores
Note: In this question Non-Debt Creating Capital Receipts are missing. We can calculate Non-Debt Creating Capital Receipts by the following formula:
Gross Fiscal Deficit: Total Expenditure of the Government - (Revenue Receipts + Non-Debt Creating Capital Receipts)
15 = (30 + 40) - (20 + Non-Debt Creating Capital Receipt)
Non-Debt Creating Capital Receipt= 35 Cr