The correct option is 1 and 3 only.
Explanation
Revenue Deficit is a fiscal indicator that represents the difference between the government's revenue expenditure and revenue receipts. It reflects the government's ability to fund its day-to-day operations from its regular income streams.
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Statement 1 is Correct:
Revenue Deficit is defined as the excess of the government's revenue expenditure over its revenue receipts. It indicates that the government's current earnings (tax and non-tax revenue) are insufficient to meet its current operational expenses (such as salaries, pensions, and interest payments).
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Statement 2 is Incorrect:
A revenue deficit implies that the government is dissaving. Instead of saving and investing, the government is consuming more than it earns. Consequently, it has to use the savings of other sectors of the economy to finance a portion of its consumption expenditure.
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Statement 3 is Correct:
A high revenue deficit compels the government to borrow money or sell assets (capital receipts) to finance its consumption requirements rather than for creating productive assets. This leads to an increase in liability without a corresponding increase in assets.
Key Takeaway:
Revenue Deficit signifies that the government is borrowing to fund current consumption rather than capital formation, which is considered imprudent fiscal management as it increases the debt burden without adding to the economy's productive capacity.