Question map
Not attempted Correct Incorrect ★ Bookmarked
Loading…
Q91 (CAPF/2013) Economy › Government Finance & Budget › Fiscal deficit concepts Answer Verified

If we deduct grants for creation of capital assets from revenue deficit, we arrive at the concept of

Result
Your answer: —  Â·  Correct: D
Explanation

The concept of 'Effective Revenue Deficit' (ERD) was introduced in the Union Budget to address accounting anomalies where certain revenue expenditures actually contribute to asset formation. While revenue expenditure is theoretically defined as spending that does not create physical or financial assets, the Central Government provides various 'Grants for creation of capital assets' to States and Union Territories [1]. These grants are recorded as revenue expenditure in the Union Budget because the resulting assets (like roads or ponds under MGNREGA) are owned by the State governments rather than the Centre [2]. By deducting these specific grants from the total Revenue Deficit, the government arrives at the Effective Revenue Deficit [1]. This metric provides a more accurate picture of the government's actual consumption expenditure and its impact on the economy's capital base [2].

Sources

  1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Effective revenue deficit' and 'effective capital expenditure' > p. 153
  2. [2] https://www.indiabudget.gov.in/budget2019-20(I)/ub2019-20/frbm/frbm2.pdf
How others answered
Each bar shows the % of students who chose that option. Green bar = correct answer, blue outline = your choice.
Community Performance
Out of everyone who attempted this question.
57%
got it right
✓ Thank you! We'll review this.

SIMILAR QUESTIONS

CDS-II · 2017 · Q76 Relevance score: 1.91

Match List-I with List-II and select the correct answer using the code given below the Lists : List-I List-n (Type of Deficit) (Explanation) A. Fiscal Deficit 1. Total Expenditure - Revenue Receipts 8s Non-debt Capital Receipts B. Revenue Deficit 2. Revenue Expenditure -Revenue Receipts C. Effective Revenue 3. Revenue Deficit -Deficit Grants for Creation of Capital Assets D. Primary Deficit 4. Fiscal Deficit - Interest Payments Code :

IAS · 2025 · Q65 Relevance score: -3.25

A country's fiscal deficit stands at ₹ 50,000 crores. It is receiving ₹ 10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹ 1,500 crores. What is the gross primary deficit?

CDS-II · 2023 · Q54 Relevance score: -3.52

Which one of the following expenditures is subtracted from Fiscal Deficit to arrive at Primary Deficit?

CDS-I · 2021 · Q34 Relevance score: -4.13

The excess of total expenditure of Government over its total receipts, excluding borrowings, is known as