The budget of a government shows the following:
| Item | Rs crore |
|---|---|
| Revenue receipts | 600 |
| Revenue expenditure | 800 |
| Capital expenditure | 400 |
| Recovery of loans | 50 |
| Sale of shares in PSUs | 50 |
What share of the fiscal deficit is made up of the revenue deficit, and what would a rise in this share indicate?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 40 per cent; a larger part of borrowing is being used for consumption expenditure rather than investment
Given:
Revenue receipts = Rs 600 crore
Revenue expenditure = Rs 800 crore
Capital expenditure = Rs 400 crore
Recovery of loans = Rs 50 crore
Sale of shares in PSUs = Rs 50 crore
Recovery of loans and sale of PSU shares are non-debt creating capital receipts.
Revenue deficit = 800 − 600 = 200
Fiscal deficit = (800 + 400) − (600 + 50 + 50) = 500
Share of revenue deficit = 200 ÷ 500 × 100 = 40 per cent
A rising share means more of the borrowing pays for consumption and less for investment.
Option (4) 25 per cent — this comes from dividing by revenue expenditure, which is the wrong base.
NCERT (2026-27): “5.2.1 Measures of Government Deficit 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. …” “… From the way gross fiscal deficit is measured as given above, it can be seen that revenue deficit is a part of fiscal deficit (Fiscal Deficit = Revenue Deficit + Capital Expenditure - non-debt creating capital receipts). A large share of revenue deficit in fiscal deficit indicated that a large part of borrowing is being used to meet its consumption expenditure needs rather than investment.” |