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6) Explain the concepts of budgetary deficit and fiscal deficit. (250 words)

Topic: Government Budgeting

6) Explain the concepts of budgetary deficit and fiscal deficit. (250 words)

Indian economy by Dutta and Sundaram

Why this question:

The question is from the static portions of GS – III paper and is intended to evaluate the concepts of budgetary deficit and fiscal deficit.

Key demand of the question:

Analyse in detail the concepts of budgetary deficit and fiscal deficit.

Directive word:

Explain – Clarify the topic by giving a detailed account as to how and why it occurred, or what is the  particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.

Structure of the answer:

Introduction:

Provide for a brief introduction of the two concepts or highlight their significance.

Body:

In brief discuss –

  • Definition of the two – budgetary deficit and fiscal deficit.
  • What is difference between fiscal deficit and budget deficit? – Budgetary deficit is the difference between all receipts and expenses in both revenue and capital account of the government.
  • A fiscal deficit occurs when a government’s total expenditures exceed the revenue that it generates, excluding money from borrowings. Deficit differs from debt, which is an accumulation of yearly deficits.
  • Discuss the significance of the two in the economy.

Conclusion:

Conclude by reasserting their significance.