What is Revenue Deficit?

0 votes
58 views
Saddiya  Anwar asked 20-Feb-2020 in Q&A categories by Saddiya Anwar

What is Revenue Deficit?

1 Answer

0 votes
Saddiya  Anwar answered 20-Feb-2020 by Saddiya Anwar

What is Revenue Deficit?

Revenue Deficit is the difference between revenue receipt and revenue expenditure. If the expenditure on the revenue account exceeds the revenue receipts, the deficit is known as revenue deficit. 

A surplus on the revenue account would indicate the expenditure on the revenue account is lower than the revenue receipts. 

One of the time honoured principles of public finance is that there should be a surplus on the revenue account so as to meet a part of the capital expenditure. Ideally, current (revenue) expenditure should be met from revenue receipts. 

In other words, if not a surplus, at least the revenue must match as otherwise a part of the government borrowings would go to meet the deficit. 

Borrowing to meet the current expenditure of the government is considered poor fiscal management. 

This is because in course of time when the burden of debt servicing increases, the government would meet to borrow even more in order to meet the expenditure requirements.