A government has revenue receipts of Rs 900 crore and total expenditure of Rs 1,500 crore. It recovers loans worth Rs 50 crore and gets Rs 50 crore from the sale of shares of public sector undertakings. It borrows Rs 300 crore at home and Rs 100 crore from abroad, and the rest of its fiscal deficit from the RBI. How much does it borrow from the RBI?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs 100 crore
First find the gross fiscal deficit. It is financed by borrowing at home, from the RBI and from abroad, so the RBI part is what is left.
Given:
Total expenditure = 1,500
Revenue receipts = 900
Non-debt creating capital receipts = 50 + 50 = 100
Borrowing at home = 300
Borrowing from abroad = 100 (Rs crore)
\( \displaystyle GFD = 1{,}500 - (900 + 100) = 500 \)
\( \displaystyle \text{Borrowing from RBI} = 500 - 300 - 100 = 100 \)
The government borrows Rs 100 crore from the RBI.
Option (2) Rs 200 crore — this forgets the recovery of loans and the PSU sale.
NCERT (2026-27): “5.2.1 Measures of Government Deficit … Fiscal Deficit: Fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding borrowing” “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. …” “Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad” |