The government budget of a hypothetical economy presents the following information :

(A) Revenue expenditure - ₹25,000 crores

(B) Capital expenditure (excluding borrowings) - ₹35,000 crores

(C) Capital receipt - ₹30,000 crores

(D) Revenue receipt - ₹20,000 crores

(E) Interest payment - ₹10,000 crores

(F) Borrowings - ₹10,000 crores

Which of the following is Fiscal Deficit ?

₹10,000 crores

The correct answer is option (2) : ₹10,000 crores

The formula for calculating the Fiscal Deficit is :

Fiscal Deficit = Total Expenditure - Total Revenue (Excluding borrowings)

Total Expenditure (TE) is the sum of Revenue Expenditure (RE) and Capital Expenditure (CE), and Total Revenue (TR) is the sum of Revenue Receipts (RR) and Capital Receipts (CR).

TE = RE + CE

TR = RR + CR (excluding borrowings)

So, Fiscal Deficit = TE - TR

Given the values : (A) + (B) = 25,000 + 35,000

(C) + (D) = 30,000 + 20,000

Fiscal Deficit = TE- TR= (A) + (B) - (C) - (D)

Substitute the values :

Fiscal Deficit = 25,000 + 35,000 - 30,000 - 20,000

Fiscal Deficit = 10,000

Therefore, the correct answer is (2) 10,000 crores

Note 1: Interest Expenditure is a part of Revenue Expenditure. Hence, it is not dealt with independently while finding Fiscal deficit.

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