Government Budget and the Economy

Government Budget

An annual financial statement showing estimated receipts and expenditures of the government for the coming fiscal year.

Revenue Receipts vs Capital Receipts

Revenue receipts do not create liabilities or reduce assets (e.g., taxes), whereas capital receipts either create liabilities or reduce assets (e.g., borrowings, disinvestment).

Revenue Expenditure vs Capital Expenditure

Revenue expenditure is incurred for normal day-to-day functioning without creating assets (e.g., salaries, subsidies), while capital expenditure creates physical/financial assets or reduces liabilities (e.g., building roads, repayment of loans).

Revenue Deficit

The excess of total revenue expenditure over total revenue receipts, indicating the shortfall of government's current income over its current consumption.

Fiscal Deficit

The excess of total expenditure over total receipts excluding borrowings, representing the total borrowing requirement of the government.

Primary Deficit

Fiscal deficit minus interest payments on previous borrowings, showing how much borrowing is needed actually excluding interest burdens.