Correct Option
Assertion (A) states that fiscal deficit is greater than budgetary deficit. The budgetary deficit is defined as the difference between total expenditure and total receipts, excluding borrowings. The fiscal deficit, on the other hand, represents the total borrowing requirement of the government. It is calculated as total expenditure minus total receipts (excluding borrowings), which essentially means it encompasses the budgetary deficit along with all forms of government borrowings and other liabilities. Therefore, the fiscal deficit is inherently greater than or equal to the budgetary deficit, making Assertion (A) true.
Reason (R) states that fiscal deficit is the borrowing from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure. The fiscal deficit measures the total financial resources a government needs to borrow to meet its expenditure when its non-debt receipts are insufficient. These resources are sourced from various avenues, including borrowing from the Reserve Bank of India (e.g., through Ways and Means Advances or subscription to government securities), market borrowings, external assistance, small savings, provident funds, and other special deposits. This definition accurately describes the financing components of the fiscal deficit, making Reason (R) true.
Reason (R) correctly explains Assertion (A) because the very components mentioned in Reason (R) – borrowing from the Reserve Bank of India and other liabilities – are the additional elements that constitute the fiscal deficit beyond the budgetary deficit. The fiscal deficit is a comprehensive measure of the government's borrowing needs, which by definition, must be greater than or equal to a budgetary deficit that excludes these borrowing components.
Incorrect Options
Option 2 is incorrect because Reason (R) provides a direct and accurate explanation for Assertion (A) by detailing the components that make the fiscal deficit larger than the budgetary deficit.
Option 3 is incorrect because Reason (R) is a factually correct statement regarding the composition and financing of the fiscal deficit.
Option 4 is incorrect because Assertion (A) is a correct statement illustrating the relationship between fiscal and budgetary deficits.