ho does fiscal deficit reflects the total borroing and liability requirement of government .please explain clearly and with the help of example
Fiscal deficit refers to the difference between the total budget expenditure and total budget receipts of the government, other than the borrowings and liabilities. That is,
Fiscal Deficit = Budget Expenditure – Budget Receipts (other than borrowing and liabilities)
or, Fiscal Deficit = (Revenue expenditure + Capital Expenditure) – (Revenue receipts + Capital receipts other than borrowings)
or, Fiscal Deficit = (Revenue expenditure + Capital Expenditure) – (Revenue receipts + Recovery of loans + Other receipts)
The excess of budgetary expenditure over budgetary receipts is the amount that is financed by government borrowings and liabilities. This amount is calculated by estimating the fiscal deficit. Therefore, we can say that fiscal deficit reflects the total borrowing and other liability requirements of the government.
For example, If the budget expenditure is 5000 crore, budget receipts are 4000 crore then ,
Fiscal deficit = 5000 - 4000 = 1000 crore
The excess of budget expenditure over budget receipts is 1000 crore. This amount will be financed by government borrowings and liability requirements of government. Hence, fiscal deficit reflects the total borrowing and other liability requirements of the government.