Union Budget 2019-20: What does Budget deficit mean; three types of deficits on basis of receipts and expenditures

Budgetary deficit is usually expressed as a percentage of GDP. If revenue expenses of the government exceed revenue receipts, it results in a revenue account deficit

FP Research June 21, 2019 17:14:20 IST
Union Budget 2019-20: What does Budget deficit mean; three types of deficits on basis of receipts and expenditures
  • Budget Deficit is the financial situation wherein the expenditures exceed the revenues

  • The government is likely to overshoot the budget deficit target previously set for the current fiscal year

  • The prime minister is now under pressure to loosen the purse strings to follow through on election promises

The Budget Deficit is the financial situation wherein the expenditures exceed the revenues. There are different types of budget deficits and can be classified on the basis of types of receipts and expenditures. Following are the four types of budget deficits: 1) Revenue deficit 2) Fiscal deficit 3) Primary deficit 4) Monetised deficit.

Budgetary deficit is usually expressed as a percentage of the gross domestic product. If revenue expenses of the government exceed revenue receipts, it results in a revenue account deficit.

Union Budget 201920 What does Budget deficit mean three types of deficits on basis of receipts and expenditures

File image of Finance Minister Nirmala Sitharaman. PTI

The government is likely to overshoot the budget deficit target previously set for the current fiscal year, three officials have warned, as a slowing economy creates a big shortfall in tax collections and prompts new stimulus plans.

Since becoming prime minister in 2014, Modi succeeded in improving public finances, trimming the fiscal deficit to 3.4 percent of gross domestic product (GDP) from 4.5 percent in 2013/14, mostly through subsidies cuts and fuel taxes.

The prime minister is now, however, under pressure to loosen the purse strings to follow through on election promises such as increased spending on roads and housing and tax cuts for companies and individuals.

Slipping fiscal discipline would hurt the “credibility” of the budget and in turn hit investment, the bond market and the rupee, analysts say. Providing a possible boost to overall revenues in the current fiscal year is an increase in the central bank dividend to Rs 1 trillion from Rs 690 billion while the Rs 900 billion in privatisation receipts could be revised upwards slightly, one of the officials said.

Reserve Bank of India (RBI) governor Shaktikanta Das has urged the government to stick to the fiscal deficit target in the forthcoming Budget and continue on the fiscal consolidation path.

Follow full coverage of Union Budget 2019-20 here

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