How Revenue Deficit and Fiscal Deficit Impact the Economy?

Date : 31/07/2020
Read: 6 mins

For the welfare of its citizens and for the purpose of meeting various expenses, governments across countries incurs a lot of expenditure. While there are various types of deficits, the most important types of deficit are Revenue Deficit and Fiscal Deficit. On one hand, Revenue Deficit is the extra amount spent as revenue expenditure by the government as compared to its total revenue receipts while on the other hand Fiscal Deficit is the excess amount of total expenditure (Capital + Revenue) incurred as compared to its total receipts (Capital + Revenue). This premium article intends to simplify these two types of deficit and portray how Fiscal Deficit acts as the most crucial macroeconomic indicator of a nation's economic well-being.

The government of any country incurs a lot of expenditure for the welfare of its citizens and for the purpose of meeting these expenses, it collects money from its citizens. This money is collected from various sources like Direct and Indirect Taxes, Sale of Assets etc. and the money so collected is called the Government’s revenue.  If the expenses, which are incurred by the government for the welfare of the nation, are less than the revenue collected by it, this leads to a situation of a surplus wherein at the end of the year – some money is still left with the government. On the other hand, if the expenses incurred by the government are more than the revenue earned by it, this leads to a deficit wherein the government ends up spending more money than it has collected. Deficit ...

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