Explain the distinction between the following:
- Revenue expenditure and Capital expenditure in a government budget.
- Primary deficit and Fiscal deficit.
CBSE OUTSIDE DELHI RE- PAPER SET 1 2018
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- Differences between revenue expenditure and capital expenditure:
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Revenue expenditure
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Capital expenditure
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Does not generate assets for the government
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Generates assets for the government.
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Liability of the government cannot be reduced by revenue expenditure.
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Liability of the government can be reduced by capital expenditure.
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Examples: Expenditure on the defence sector, paying interest payments.
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Examples: Buying of shares, expenditure on building roads and highways.
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- Differences between primary deficit and capital deficit:
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Primary deficit
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Fiscal deficit
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It is the difference between fiscal deficit and interest payment.
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It is the difference between the government's total expenditure and total receipts without considering the borrowing.
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It indicates borrowing requirement of the government exclusive of interest payment.
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It indicates borrowing requirement of the government inclusive of interest payment.
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Primary deficit = Fiscal deficit - Interest payment.
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Fiscal deficit = Total expenditure - Total receipts (except borrowings).
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