Revenue Deficit: It is the difference between revenue receipts and revenue expenditure. It is that deficit where Revenue Receipts are less than Revenue Expenditure. It is the excess of Government’* expenditure over its revenue.
It can be expressed as follows:
Revenue Deficit = Revenue Expenditure – Revenue Receipts.
Fiscal Deficit: It is that deficit which includes budget deficit plus borrowing from the market and other liabilities of the Government. It is the excess of Government’* total expenditure over its total revenue. It can be expressed as follows:
Fiscal Deficit = Total Expenditure – Revenue Receipts + NonDebt receipts.
Primary Deficit: It is that deficit which is the difference between fiscal deficit and interest paid by the Government. It is calculated by finding the difference between Government’* total income and expenditure (interest earned and interest paid is excluded). Revenue deficit and capital deficits are two types of primary deficits. The Primary deficit indicates the borrowing requirements of the Government to meet fiscal deficit excluding interest payments. It can be expressed as follows:
Primary Deficit = Fiscal Deficit – Interest payments.
Deficit reduction: The deficit can be reduced through the following ways:
- By increasing direct tax collection more effectively.
- By reducing public expenditure through efficient administration.
- By undertaking disinvestment (raising revenue through sale of shares/stocks of public sector undertakings).
