11 question .. Pls answer
Revenue Deficit
The shortfall between the total revenue received to the total revenue expenditure is revenue deficit.
Revenue deficit = Total revenue expenditure – Total revenue receipts
This deficit only includes current income and current expenses. A high value of deficit indicates that the government should cut down on its expenditures. The government may increase its revenue receipts by increasing tax income or by borrowing. Disinvestment which means selling off assets is another remedial measure to reduce revenue deficit.
Fiscal Deficit
A fiscal deficit is a gap by which government’s total expenditures exceed the government’s total generated revenue. This, however, does not include the government borrowings.
Fiscal deficit = Total expenditure – Total receipts excluding borrowings
Fiscal deficit indicates the amount of money that the government will need to borrow during the financial year. A greater deficit implies more borrowing by the government and the extent of the deficit indicates the amount of expense for which the money is borrowed.
A fiscal deficit is a gap by which government’s total expenditures exceed the government’s total generated revenue. This, however, does not include the government borrowings.
A huge disadvantage or implication of fiscal deficit is it may lead to a debt trap. Also, it may lead to unnecessary and wasteful expenditure by the government. Increased fiscal deficit leads to uncontrolled inflation. Borrowing is one way to reduce fiscal deficit. Another way is deficit financing.
Deficit financing refers to the printing of new notes to increase cash flow in the system. The fiscal deficit is a positive outcome if it leads to the creation of assets. It is detrimental to the economic condition of the nation if it is used to simply cover revenue deficit.
Thus, no, I don't agree with the statement as fiscal deficit can also be managed through Deficit Financing.