Explain the relationship between revenue deficit and fiscal deficit. Can there be fiscal deficit without a revenue deficit?
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Fiscal deficit is defined as the excess of total budgeted expenditure over revenue receipts and non-debt capital receipts, i.e.
Fiscal deficit = Total Expenditure - Revenue Receipts - Non-debt Capital Receipts.
= Revenue expenditure + capital expenditure - Revenue Receipts - Non-debt Capital Receipts.
= Revenue deficit + [Capital Expenditure - Non-debt Capital Receipts].
Hence, if capital expenditure is greater than non-debt capital receipts, then fiscal deficit may exist even if there is no revenue deficit.
Fiscal deficit = Total Expenditure - Revenue Receipts - Non-debt Capital Receipts.
= Revenue expenditure + capital expenditure - Revenue Receipts - Non-debt Capital Receipts.
= Revenue deficit + [Capital Expenditure - Non-debt Capital Receipts].
Hence, if capital expenditure is greater than non-debt capital receipts, then fiscal deficit may exist even if there is no revenue deficit.
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