Read the following statements - Assertion (A) and Reason (R)carefully and choose the correct alternative given below:
Assertion (A) :Fiscal deficit in a government budget can emerge without a revenue deficit.
Reason (R):Fiscal deficit without a revenue deficit is possible only when revenue budget is balanced and capital budget shows a deficit .

 Assertion (A) is true but Reason (R) is false

The correct answer is Option 3:   Assertion (A) is true but Reason (R) is false

Assertion (A) :Fiscal deficit in a government budget can emerge without a revenue deficit. This is correct. . Fiscal deficit represents the excess of the government's total expenditure (both revenue and capital) over its total receipts, excluding borrowings. On the other hand, revenue deficit focuses only on the gap between revenue expenditure and revenue receipts. It is entirely possible for the revenue budget to be balanced (i.e., revenue receipts equal revenue expenditure), and still have a fiscal deficit if the government’s capital expenditure exceeds its non-debt capital receipts. Therefore, a fiscal deficit can occur independently of a revenue deficit when the imbalance lies within the capital budget.
Reason (R):Fiscal deficit without a revenue deficit is possible only when revenue budget is balanced and capital budget shows a deficit . This is incorrect. While a balanced revenue budget and a capital budget deficit can lead to fiscal deficit, that’s not the only condition. Fiscal deficit can also exist when there is revenue budget surplus but the capital budget deficit exceeds the revenue budget surplus. Therefore, the Reason provided is too narrow and does not account for all possible scenarios.

Note: Fiscal deficit is a position where total expenditure of the government exceeds sum total of its revenue receipts and non-debt capital receipts. Hence there can be a fiscal deficit without revenue deficit in following 2 situations:

i When capital budget shows a deficit and revenue budget is balanced.

ii When deficit in capital budget is greater than surplus in revenue budget.