Excess of expenditure over revenue is known as the deficit. An example of a deficit is when you owe Rs.100 and only you have Rs.80, Here Rs.20 is the deficit.
A revenue Deficit is a situation where the revenue does not match with the expenses to be incurred. Dissimilarity in the expected revenue and expenditure can result in a revenue deficit. The shortage of total revenue receipts compared to total revenue expenditure is defined as a Revenue deficit.
The difference between total revenue and total expenditure of the government is called a fiscal deficit. The Fiscal deficit is also on the same line as the Revenue deficit but with a larger range. it includes revenue deficit and other items which were excluded when calculating revenue deficit. A fiscal deficit is defined as the excess of total budget expenditure over total budget receipts excluding borrowings during a fiscal year.
Let us know some differences about the REVENUE DEFICIT and FISCAL DEFICIT in the table given below.
|REVENUE DEFICIT||FISCAL DEFICIT|
|Example: If you thought you can make 5,000 at the end of the month and you just made 4,000 bucks, you are facing a revenue deficit of 1,000 bucks.||Example: If you plan to spend 5,000 bucks this month but you expect to earn 4,000 bucks you are facing a fiscal deficit of 1,000 bucks.|
|The formula for calculating is Revenue deficit = Total revenue expenditure – Total revenue receipts.||The formula for calculating is Fiscal deficit = Total expenditure – Total receipts excluding borrowings.|
|Revenue deficit acts as an indicator of the inability of the government to meet its regular expenditures.||Fiscal deficit acts as an indicator of the total borrowings needed by the government.|
|Revenue deficit arises when the government’s actual net receipts are lower than the expected receipts.||Fiscal deficit takes place due to either revenue deficit or a significant change in capital expenditure.|
|If the actual receipts are higher than expected revenue, it is termed as revenue surplus.||Fiscal surplus or Surplus budget is a situation which arises when revenue earned by the government exceeds its expenditure.|
|Government borrowings are to be paid interest which increases consumption expenditure which in turn leads to the inflationary situation in the economy.||Fiscal Deficit increases the inflation in the country by pumping more money into the company if the supply of goods does not increase.|
|Government tries to increase its receipts from various sources of tax and non-tax revenue to control revenue deficit.||The more the Fiscal deficit the more the government will have to borrow or resort to printing money to meet the needs.|