(a) Revenue Deficit –
Revenue deficit may be defined as a position where total revenue expenditure of the government exceeds its total revenue receipts. Thus, Revenue deficit = Total revenue expenditure – Total revenue receipts Revenue deficit means dissavings on government account and the use of savings of other sectors of the economy to finance a part of the consumption expenditure of the government. As a result, borrowed funds from the capital account are used to meet a part of consumption expenditure of the government. This affects the entire economy adversely. Revenue deficit leads to rise in prices and hampers the process of economic growth.
(b) Fiscal Deficit – Fiscal deficit may be defined as a position where total expenditure of the government is more than its sum total of revenue receipts and non-debt capital receipts. Thus, Fiscal deficit = Total expenditure – Total revenue receipts – Non-debt capital receipts Fiscal deficit within a limit does not create any problem. But, if fiscal deficit is high, it would create a large number of problems. High fiscal deficit encourages wasteful and unnecessary expenditure on the part of the government. Further, a high fiscal deficit leads to financial instability because high fiscal deficit encourages borrowings on the part of the government. This creates a large burden of interest payment and repayment of loans in the future. A country has to face the problem of debt-trap. Further, a large fiscal deficit may be inflationary.
(c) Primary Deficit – Primary deficit means excess of total expenditure of the government excluding interest payments over sum total of its revenue receipts and non-debt capital receipts. Thus, Primary Deficit = Fiscal deficit – Interest payments From the above definitions, we find that primary deficit is a narrower concept and a part of fiscal deficit. Primary deficit shows the borrowing requirements of the government for meeting its existing expenses other than interest payments.
