Which of the below mentioned elements occurs when the government’s revenue expenditure is more than its revenue receipts?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Revenue Deficit.
A Revenue Deficit occurs when the government’s revenue expenditure exceeds its revenue receipts. Revenue expenditure includes recurring expenses like salaries, subsidies, and interest payments, while revenue receipts consist of tax and non-tax revenues. This type of deficit highlights that the government is unable to meet its regular operating expenses through its regular income, indicating financial stress in daily operations. It does not account for capital receipts or capital expenditure. A revenue deficit suggests the government might be borrowing not for investment, but to cover routine expenses, which is not sustainable in the long run. Therefore, it is a key fiscal indicator.
Other Options:
Capital Deficit
Incorrect – There is no officially recognized term called 'Capital Deficit' in government accounting. The correct classifications are Revenue and Fiscal deficits.
Budgetary Deficit
Incorrect – This is an outdated term that referred to the difference between total expenditure and total receipts (including borrowings). It is no longer used in modern fiscal reports.
Fiscal Deficit
Incorrect – Fiscal Deficit includes both revenue and capital expenditures and shows the total borrowing requirement of the government. It's broader than revenue deficit.