Revenue deficit is the real deficit and not the fiscal deficit. How?
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- Fiscal deficit is defined as excess of total expenditure over total receipts (revenue and capital receipts) excluding borrowing.
- In other words, it is equal to borrowings and borrowings are just an act of the government which may be finance interest payments of the government also.
- While revenue deficit exclusively takes into account current interest payment obligations of the government not connected with the actual activities.
- Thus, revenue deficit is more important than fiscal deficit.
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