How is revenue deficit calculated?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Revenue expenditure – Revenue receipts.
The Revenue Deficit occurs when the government's current "earning" (revenue receipts) is less than its current "spending" (revenue expenditure). It specifically focuses on routine operational expenses and income, excluding investment-related capital items.
A high revenue deficit indicates that the government is borrowing money not for creating assets (like roads or bridges), but to cover daily administrative costs like salaries, pensions, and interest payments.