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Which of the following statement's is/are correct about effective revenue deficit?
1. This is the difference between revenue deficit and grants given for the capital formation.
2. Its main purpose is to show the structural imbalances in revenue account.
Codes:
1. This is the difference between revenue deficit and grants given for the capital formation.
2. Its main purpose is to show the structural imbalances in revenue account.
Codes:
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Which of the following statements is/are correct about effective reven...
Effective Revenue Deficit
Effective Revenue Deficit is a concept introduced in the budget 2011-12 with the aim of enhancing the quality of fiscal consolidation. Let's break down the statements provided in the question to understand the concept better.
Statement 1:
This is the difference between revenue deficit and grants given for the capital formation.
- Revenue Deficit refers to the excess of revenue expenditure over revenue receipts. On the other hand, Grants for Capital Formation are funds provided by the government for creating assets.
- Effective Revenue Deficit is calculated by deducting grants given for the capital formation from the revenue deficit. It helps in capturing the impact of grants on the revenue deficit and provides a clearer picture of the fiscal health.
Statement 2:
Its main purpose is to show the structural imbalances in the revenue account.
- Effective Revenue Deficit focuses on the structural imbalances in the revenue account by considering the impact of grants on the deficit. It helps in identifying the portion of revenue deficit that is used for capital expenditure.
- By calculating Effective Revenue Deficit, policymakers can assess the efficiency of revenue expenditure and make necessary adjustments to achieve fiscal sustainability.
Conclusion:
Both statements are correct as they highlight the significance of Effective Revenue Deficit in analyzing fiscal performance and addressing structural imbalances in the revenue account. It is an important metric for policymakers to ensure responsible fiscal management and sustainable economic growth.
Effective Revenue Deficit is a concept introduced in the budget 2011-12 with the aim of enhancing the quality of fiscal consolidation. Let's break down the statements provided in the question to understand the concept better.
Statement 1:
This is the difference between revenue deficit and grants given for the capital formation.
- Revenue Deficit refers to the excess of revenue expenditure over revenue receipts. On the other hand, Grants for Capital Formation are funds provided by the government for creating assets.
- Effective Revenue Deficit is calculated by deducting grants given for the capital formation from the revenue deficit. It helps in capturing the impact of grants on the revenue deficit and provides a clearer picture of the fiscal health.
Statement 2:
Its main purpose is to show the structural imbalances in the revenue account.
- Effective Revenue Deficit focuses on the structural imbalances in the revenue account by considering the impact of grants on the deficit. It helps in identifying the portion of revenue deficit that is used for capital expenditure.
- By calculating Effective Revenue Deficit, policymakers can assess the efficiency of revenue expenditure and make necessary adjustments to achieve fiscal sustainability.
Conclusion:
Both statements are correct as they highlight the significance of Effective Revenue Deficit in analyzing fiscal performance and addressing structural imbalances in the revenue account. It is an important metric for policymakers to ensure responsible fiscal management and sustainable economic growth.
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Community Answer
Which of the following statements is/are correct about effective reven...
Effective revenue deficit = Revenue deficit - grants given to states for capital formation
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Which of the following statements is/are correct about effective revenue deficit?1. This is the difference between revenue deficit and grants given for the capital formation.2. Its main purpose is to show the structural imbalances in revenue account.Codes:a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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