Revenue Deficit is a situation where the revenue does not match with the expenses to be incurred. A dissimilarity in the expected revenue and expenditure can result in revenue deficit. The shortage of total revenue receipts compared to total revenue expenditure is defined as Revenue deficit.
The difference between total revenue and total expenditure of the government is called as fiscal deficit. The Fiscal deficit is also on the same line of the Revenue deficit but with a larger range. it includes revenue deficit and other items which were excluded when calculating revenue deficit. Fiscal deficit is defined as the excess of total budget expenditure over total budget receipts excluding borrowings during a fiscal year.
Let us know some differences about the REVENUE DEFICIT and FISCAL DEFICIT in the table given below.
REVENUE DEFICITFISCAL DEFICITExample: If you thought you can make 5,000 at the end of the month and you just made 4,000 bucks, you are facing a revenue deficit of 1,000 bucks.Example: If you plan to spend 5,000 bucks this month but you expect to earn 4,000 bucks you are facing a fiscal deficit of 1,000 bucks. FormulaThe formula for calculating is Revenue deficit = Total revenue expenditure – Total revenue receipts.The formula for calculating is Fiscal deficit = Total expenditure – Total receipts excluding borrowings. Indicator OfRevenue deficit acts as an indicator of the inability of the government to meet its regular expenditures.Fiscal deficit acts as an indicator of the total borrowings needed by the government. DeficitRevenue deficit arises when the government’s actual net receipts are lower than the expected receipts. Fiscal deficit takes place due to either revenue deficit or a significant change in capital expenditure. SurplusIf the actual receipts are higher than expected revenue, it is termed as revenue surplus.Fiscal surplus or Surplus budget is a situation which arises when revenue earned by the government exceeds its expenditure. ImpactGovernment borrowings are to be paid interest which increases consumption expenditure which in turn leads to the inflationary situation in the economy.Fiscal Deficit increases the inflation in the country by pumping more money into the company if the supply of goods does not increase. Controlling MeasuresGovernment tries to increase its receipts from various sources of tax and non-tax revenue to control revenue deficit.The more the Fiscal deficit the more the government will have to borrow or resort to printing money to meet the needs.