What is the Difference Between Fiscal Deficit and Revenue Deficit?

The difference between fiscal deficit and revenue deficit lies in the nature of the shortfall in government finances. Here are the key differences between the two:

1. Meaning: Fiscal deficit refers to the excess of total expenditure (including both revenue and capital expenditure) over total receipts (excluding borrowings) in a fiscal year. On the other hand, revenue deficit occurs when realized net income is less than the projected net income, which means that the actual amount of revenue is less than the projected amount.
2. Indication: Fiscal deficit indicates the government's total borrowing requirements or debt-creating capital. Revenue deficit, on the other hand, reflects the government's inability to meet its regular and recurring expenditure.
3. Formula: The formula for calculating fiscal deficit is Fiscal Deficit = Total Expenditure - Total Receipts (excluding borrowings). The formula for calculating revenue deficit is Revenue Deficit = Revenue Expenditure - Revenue Receipts.
4. Implications: A fiscal deficit means that the government is spending beyond its means or there is a shortfall in income compared to spending. A revenue deficit does not necessarily mean a loss of revenue; it simply measures the difference between the projected and actual net income.

To remedy a fiscal deficit, a government can raise taxes, cut expenses, or borrow money. To address a revenue deficit, a government can raise taxes, cut expenses, or take measures to increase revenue receipts.

Comparative Table: Fiscal Deficit vs Revenue Deficit

Here is a table comparing the differences between fiscal deficit and revenue deficit:

Fiscal deficit refers to the excess of total expenditure (including both revenue and capital expenditure) over total receipts (which include borrowings). On the other hand, revenue deficit is the gap between government revenue expenditure and government revenue receipts.