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      Question

      Which of the following scenarios correctly describes a

      'Revenue Deficit' in the Union Budget?
      A The government's total expenditure exceeds its total receipts, including both capital and revenue accounts Correct Answer Incorrect Answer
      B The government's capital expenditure exceeds its capital receipts Correct Answer Incorrect Answer
      C The government's revenue expenditure exceeds its revenue receipts, meaning the government must borrow even to meet its day-to-day operational expenses Correct Answer Incorrect Answer
      D The government's interest payments on debt exceed its tax revenues Correct Answer Incorrect Answer
      E The fiscal deficit after excluding interest payments on past borrowings Correct Answer Incorrect Answer

      Solution

      Revenue Deficit = Revenue Expenditure – Revenue Receipts. Revenue receipts include tax revenue and non-tax revenue; revenue expenditure includes salaries, subsidies, interest payments, pensions, and other administrative expenses. A revenue deficit indicates that the government's regular income is insufficient to cover its routine expenses it must borrow to fund operations, not just capital investments. A revenue deficit is considered unfavourable because borrowing for consumption rather than investment adds to debt without creating productive assets. Option A describes the Fiscal Deficit; Option E describes the Primary Deficit (fiscal deficit minus interest payments). Budget 2026-27 targets a fiscal deficit of 4.3% of GDP.

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