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Q100 (IAS/1999) Economy › Government Finance & Budget › Fiscal deficit concepts Answer Verified

Assertion (A) : Fiscal deficit is greater than budgetary deficit. Reason (R) : Fiscal deficit is the borrowings from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.

Result
Your answer: —  Â·  Correct: A
Explanation

Assertion is true because fiscal deficit measures the government’s total borrowing requirement, while budgetary (or budget) deficit historically referred to borrowings from the Reserve Bank of India. Textbooks state: Fiscal Deficit = Budget Deficit (i.e., borrowing from RBI) + market borrowings and other liabilities, so fiscal deficit covers RBI borrowing plus additional market/other liabilities [1]. Official definitions likewise record fiscal deficit as total borrowing from all sources, not just RBI, while the budgetary deficit concept reflected borrowings from RBI alone [3]. Therefore the Reason correctly describes fiscal deficit’s composition and logically explains why fiscal deficit is generally greater than the budgetary deficit.

Sources

  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > N. Fiscal Deficit > p. 110
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2. I. Budget Deficit (or Government Deficit) > p. 109
  3. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.5 Government Deficits > p. 153
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