If we deduct grants for creation of capital assets from revenue deficit, we arrive at the concept of
primary deficit
net fiscal deficit
budgetary deficit
effective revenue deficit
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UPSC CAPF – 2013
– Fiscal Deficit = Total Expenditure – Total Receipts (excluding borrowings). It represents the total borrowing requirement of the government to meet its expenditure.
– Primary Deficit = Fiscal Deficit – Interest Payments. It shows the fiscal deficit excluding the interest burden on past debts.
– Budgetary Deficit (now largely obsolete in India) was the difference between total expenditure and total receipts (both revenue and capital).
– Effective Revenue Deficit: Introduced in the Union Budget 2011-12, it is defined as Revenue Deficit minus Grants for Creation of Capital Assets. Grants given by the Union Government to states and UTs are treated as revenue expenditure in the Union Budget, but if these grants are used by the recipients to create capital assets, they contribute to overall capital formation in the economy. The effective revenue deficit aims to reflect the revenue deficit more accurately by excluding this portion of grants that leads to asset creation.