Concepts of Budget Deficit in India

Budget deficit is the difference between the government's total expenditure and its total revenue. In India, there are four concepts of budget deficit, which are as follows:

1. Fiscal Deficit:
Fiscal deficit is the difference between the government's total expenditure and its total revenue, excluding borrowings. In other words, it is the amount of money that the government needs to borrow to meet its expenditure. Fiscal deficit is an important indicator of the government's borrowing requirements and its ability to repay debts. It is the most widely used concept of budget deficit in India.

2. Budgetary Deficit:
Budgetary deficit is the difference between the government's total expenditure and its total revenue, including borrowings. It is the amount of money that the government needs to borrow to meet its expenditure. Budgetary deficit was used in the past as the primary indicator of budget deficit in India.

3. Primary Deficit:
Primary deficit is the difference between the government's total expenditure and its total revenue, excluding interest payments on past borrowings. It is used to measure the government's ability to repay debts without taking on new loans. Primary deficit is an important indicator of the government's fiscal discipline.

4. Revenue Deficit:
Revenue deficit is the difference between the government's revenue expenditure and its revenue receipts. It indicates that the government is not able to meet its day-to-day expenses from its own revenue sources and needs to borrow money for the same.

Redundant Concept of Budget Deficit in India

Among the four concepts of budget deficit in India, the concept of budgetary deficit has become practically redundant. This is because budgetary deficit includes borrowings, which are already included in fiscal deficit. Therefore, budgetary deficit does not provide any additional information beyond fiscal deficit. As a result, the government of India stopped using budgetary deficit as a measure of budget deficit in 2017-18 budget.

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