'The fiscal deficit gives the borrowing requirement of the government'. Elucidate.
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'The fiscal deficit gives the borrowing requirement of the government'. Elucidate.
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(i) The fiscal deficit is defined as the difference between total expenditure and total receipts (revenue and capital receipts), excluding borrowing. As an example, consider the following equation: Fiscal Deficit

 = Total Budget Expenditure - Total Budget Receipts (Net of borrowing)

= Total Expenditure (Revenue Expenditure + Capital Expenditure)

= Revenue Receipts (Tax Revenue + Non-Tax Revenue) - Non-Debt Capital Receipts (Recovery of Loans + Dis-investment Proceeds)

 = Revenue Deficit + Capital Deficit (excluding Borrowing)- Borrowing

= Net borrowing at home + Borrowing from RBI + Borrowing from abroad

 (ii) The fiscal deficit represents the government's total borrowing needs from all .sources.

(iii) As the government borrows more, its future obligation to repay loans with interest grows, resulting in a larger revenue deficit. As a result, the fiscal deficit should be kept as low as possible.
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