The expenditure in the government budget is known to be $2800 million. The revenue receipts are $1700 million and non-debt capital receipts are $400 million, then the fiscal deficit of the government will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → $700 million
When a government spends more than it receives, it must borrow the difference. The fiscal deficit measures that borrowing: total expenditure minus total receipts excluding borrowing. Non-debt creating capital receipts, such as recovery of loans and the proceeds from the sale of PSUs, create no debt, so they are deducted along with revenue receipts.
Given:
Total expenditure = $2800 million
Revenue receipts = $1700 million
Non-debt capital receipts = $400 million
Working it out:
Fiscal deficit = Total expenditure − (Revenue receipts + Non-debt creating capital receipts)
Fiscal deficit = 2800 − (1700 + 400)
Fiscal deficit = 2800 − 2100
Fiscal deficit = $700 million, which is Option (2)
NCERT (2025-26): “5.2.1 Measures of Government Deficit … Fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding borrowing Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts) 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.…” |