Deficit

Reviewed by Anjaneyulu | Updated on Sep 28, 2020

Introduction

In simple terms, a deficit means an amount by which a sum falls short of some reference amount. A deficit is an amount by which one resource, especially money, falls short of what is required. If expenditures exceed income, imports exceed exports, or liabilities exceed assets, a deficit exists. A deficiency or loss is synonymous with a deficit, and it is the opposite of a surplus.

The cumulative negative amounts in a deficit are higher than the total positive amounts. In other words, money outflows exceed fund inflows. A deficit can occur when a government, corporation, or person spends more than earned in a given period, which is usually a year.

Types of Deficits in India

The following are the various types of deficits and the way to arrive at them.

  1. Budget deficit: Total expenditure as reduced by total receipts
  2. Revenue deficit: Revenue expenditure as reduced by revenue receipts.
  3. Fiscal Deficit: Total expenditure as reduced by total receipts except borrowings.
  4. Primary Deficit: Fiscal deficit as reduced by interest payments.
  5. Effective Revenue Deficit: Revenue deficit as reduced by grants for the creation of capital assets.
  6. Monetized Fiscal Deficit: The part of the fiscal deficit which is covered by the borrowing from the RBI.

Latest News

In India, the revenue deficit was targeted at 2.3% of GDP, and the fiscal deficit was targeted at 3.3% of GDP for the FY 2019-20. The target for the primary deficit is 0.2% of GDP. The nominal GDP is estimated to grow at a rate of 12% in FY 2019-20.

The revenue deficit for the Apr-Nov 2019 period came in at ₹6.23 lakh crore, which is about 129 per cent of the Budget estimate for 2019-20. The fiscal deficit for the April-November 2019 period came in at ₹8.08 lakh crore, which is about 115 per cent of the financial year 2019-20 target of ₹7.04 lakh crore.

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