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Fiscal Deficit of India and its components notes-CSEET

Fiscal Deficit of India and its components notes-CSEET

Fiscal Deficit of India and its components:

ICSI CSEET: The Council of the ICSI has released a notice regarding CSEET on the day of the inauguration of ICSI Golden Jubilee Celebrations on 4th Oct 2017.

The Gazette Notification on the Company Secretaries (Amendment) Regulations, 2020 has been published on 3rd February 2020 in the Official Gazette of India and the same shall be applicable from the said date of publication.

Now ICSI Published a notice regarding CSEET Test which going to start from 2020 May.

We are now going to discuss the details of CSEET Paper-3 Economics and Business Environment notes – Fiscal Deficit of India and its components.

Fiscal Deficit of India and its components

Fiscal Deficit of India and its components

Fiscal Deficit of India and its components notes:

A fiscal deficit is a shortfall in a government’s income compared with its spending. The government that has a fiscal deficit is spending beyond its means.

A fiscal deficit is calculated as a percentage of gross domestic product (GDP), or simply as total dollars spent in excess of income. In either case, the income figure includes only taxes and other revenues and excludes money borrowed to make up the shortfall.

In other words, fiscal deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure. A fiscal deficit situation occurs when the government’s expenditure exceeds its income. This difference is calculated both in absolute terms and also as a percentage of the Gross Domestic Product (GDP) of the country. A recurring high fiscal deficit means that the government has been spending beyond its means.

The government describes fiscal deficit of India as “the excess of total disbursements from the Consolidated Fund of India, excluding repayment of the debt, over total receipts into the Fund (excluding the debt receipts) during a financial year”.

The elements of the fiscal deficits are:

(a)   The revenue deficit, which is the difference between the government’s current or revenue expenditure and total current receipts, that is excluding borrowing.

(b)   Capital expenditure.

In order to have a proper understanding on fiscal deficit, it is essential to have a fair idea on government’s total income and receipts.

  1. Revenue Receipts
  • Corporation Tax
  • Income Tax
  • Custom Duties
  • Union Excise Duties
  1. Non-tax Revenues
  • Interest Receipts
  • Dividends and Profits
  • External Grants
  • Other non-tax revenues
  • Receipts of union territories
  1. Expenditures of the government
  • Revenue Expenditure
  • Capital Expenditure
  • Interest Payments
  • Grants-in-aid for creation of capital assets

Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts)

If the total expenditure of the government exceeds its total revenue and non-revenue receipts in a financial year, then that gap is the fiscal deficit for the financial year. The fiscal deficit is usually mentioned as a percentage of GDP. For example, if the gap between the Centre’s expenditure and total income is Rs 5 lakh crore and the country’s GDP is Rs 200 lakh crore, the fiscal deficit is 2.5% of the GDP.


From the following exhibit, the various components covered under the fiscal deficit may be understood                                  (INR Crore)









% change (RE 2018-19 to BE 2019-20)
Revenue Expenditure18,78,83321,41,7722140.61224,47,78014.3%
Capital Expenditure2,63,1403,00,4413.16.6233,38,5696.9%
Total Expenditure21,41,97324,42,21324,57,23527,86,349134%
Revenue Receipts1435,23317,25,73817,29,68219,62,76113.5%
Capital Receipts1,15,67892,19993,1551,19,82828.6%
of which:
Recoveries of Loans15,63312,1991345514,82812-7%
Other receipts (including disinvestments)1,00,04580,00080,0001,05,00031.3%
Total Receipts (without borrowings)15,50,91118,17,93718,22,83720,82,58914.2%
Revenue Deficit4,43,6004,16,0344,10,9304,85,01918.0%
% of GDP2. 
Fiscal Deficit5,91,0626,24,2766,34.3987,03,76010.9%
% of GDP3. 
Primary Deficit62,11048,48146,82843,289-7.6%
% of GDP0. 

Note: Budgeted estimates (BE) are budget allocations announced at the beginning of each financial year. Revised Estimates (RE) are estimates of projected amounts of receipts and expenditure until the end of the financial year. Actual amounts are audited accounts of expenditure and receipts in a year.

The fiscal deficit for the year 2017-18 (Actuals) is calculated by deducting Total Receipts of INR 15,50,911 from the Total Expenditure of INR 21,41,973 = INR 5,91,062 Crore.

It is to be noted that fiscal deficit could be financed by borrowing from Reserve Bank of India, which also known as deficit financing or money creation and market borrowing (from money market, that is mainly from banks).

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