Identify the government deficit calculated by the following formula:
Net borrowing at home + Borrowing from RBI + Borrowing from abroad.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Gross Fiscal Deficit
When the government spends more than its revenue receipts and its non-debt creating capital receipts bring in, it must borrow the gap. That gap is the gross fiscal deficit, and seen from the side of how it is financed, it is all this borrowing added together:
Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad
Why the other options are incorrect
Option (1) Primary Deficit — Incorrect. The primary deficit is the fiscal deficit minus interest payments. It leaves out the borrowing needed to pay interest on past debt, so it is smaller than the total borrowing.
Option (3) Capital Expenditure — Incorrect. Capital expenditure is government spending that creates assets or reduces liabilities, such as building roads or repaying loans. It is a kind of spending, not a deficit, and is only one of the items the borrowing finances.
Option (4) Revenue Deficit — Incorrect. The revenue deficit is the excess of revenue expenditure over revenue receipts. It covers only the revenue account, not the whole borrowing of the government.
NCERT: Introductory Macroeconomics — Chapter 5: Government Budget and the Economy (2025-26)
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