Which of the following expression is correct regarding the gross fiscal deficit?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad.
This formula captures the government's total borrowing needs when its expenditures exceed revenues.
It accounts for all domestic borrowings (excluding inter-governmental transactions), loans taken from the Reserve Bank of India (often through ad-hoc treasury bills), and external borrowings from foreign governments or international institutions.
The inclusion of all three components ensures a comprehensive measure of the fiscal gap, reflecting both internal and external liabilities incurred by the government to finance its deficit.