Which of the below mentioned elements occurs when the government’s revenue expenditure is more than its revenue receipts?

Correct option is D

The correct answer is (d) Revenue Deficit

• Revenue Deficit occurs when the government's revenue expenditure exceeds its revenue receipts.

• Revenue receipts refer to the government's income from taxes, duties, and other sources, while revenue expenditure refers to spending on goods and services, interest payments, subsidies, etc.

• A revenue deficit indicates that the government is borrowing or utilizing other funds to meet its recurring expenditures rather than generating sufficient income from its revenue sources.

Why other options are incorrect:

• (a) Fiscal Deficit: A fiscal deficit occurs when the total expenditure (including both revenue and capital expenditure) exceeds the total revenue receipts, i.e., when the government borrows money to meet its overall expenditure.

• (b) Capital Deficit: A capital deficit occurs when capital expenditure exceeds capital receipts, which are related to investments and borrowings. It is different from a revenue deficit.

• (c) Budgetary Deficit: Budgetary deficit is a broader term that includes both revenue deficit and capital deficit. It refers to the gap between total government expenditure and total receipts (both revenue and capital).

Information Booster:
• Revenue Deficit is an important indicator of the government's financial health, showing whether its daily operations are self-sustaining or dependent on borrowing.
• The Revenue Deficit can be a concern for a country's fiscal policy, as it indicates that the government is borrowing to fund regular activities rather than investments for future growth.
• Revenue Deficit can be reduced through better tax collection, reducing subsidies, or rationalizing expenditures.

Additional Information:

• Fiscal Deficit is a key indicator in measuring a country’s overall fiscal health, often used to assess the sustainability of public debt.

• A revenue deficit is often viewed as a sign of structural inefficiency in government finances, as it implies that the government is relying more on borrowing to fund its day-to-day activities than on sustainable revenue sources.