With reference to the "Fiscal Deficit", consider the following statements: 1. It is the difference between the government’s total expenditure and its total receipts including borrowing. 2. It indicates the total borrowing requirements of the government from all sources. 3. Non-debt creating capital receipts are included in total receipts for calculating fiscal deficit. Which of the statements given above is/are correct?

Correct Option The correct option is 2 and 3 only. Explanation Fiscal Deficit is the most comprehensive indicator of the government's budgetary position. It represents the shortfall in the government's non-debt resources compared to its total spending, indicating the amount the government needs to borrow to meet its expenditure requirements. Statement-wise Analysis - Statement 1 is Incorrect: Fiscal Deficit is defined as the difference between the government’s Total Expenditure and its Total Receipts excluding borrowings and other liabilities. If borrowings were included in "Total Receipts," the value would equal Total Expenditure (since the budget balances), resulting in a difference of zero. - Statement 2 is Correct: The Fiscal Deficit numerically equals the total borrowing requirements of the government from all sources (including market borrowings, small savings, and external debt) to finance the excess expenditure. - Statement 3 is Correct: The formula for calculating Fiscal Deficit is: Fiscal Deficit = Total Expenditure - (Revenue Receipts + Non-debt Capital Receipts). Non-debt creating capital receipts (such as recovery of loans and proceeds from disinvestment) are included in the receipts calculation because they are genuine inflows that do not create future repayment obligations, unlike borrowings. Key Takeaway Fiscal Deficit reflects the total borrowing need of the government. It is calculated as Total Expenditure minus (Revenue Receipts + Non-debt Capital Receipts).

NCERT Class 12 Economics — Chapter 7: Government Budget and the Economy

mcqhard

With reference to the "Fiscal Deficit", consider the following statements:

It is the difference between the government’s total expenditure and its total receipts including borrowing.
It indicates the total borrowing requirements of the government from all sources.
Non-debt creating capital receipts are included in total receipts for calculating fiscal deficit.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 and 3 only
B1, 2 and 3
C1 and 2 only
D2 only

Did you get this right?

Solution

Correct Option

The correct option is 2 and 3 only.

Explanation

Fiscal Deficit is the most comprehensive indicator of the government's budgetary position. It represents the shortfall in the government's non-debt resources compared to its total spending, indicating the amount the government needs to borrow to meet its expenditure requirements.

Statement-wise Analysis

Statement 1 is Incorrect: Fiscal Deficit is defined as the difference between the government’s Total Expenditure and its Total Receipts excluding borrowings and other liabilities. If borrowings were included in "Total Receipts," the value would equal Total Expenditure (since the budget balances), resulting in a difference of zero.
Statement 2 is Correct: The Fiscal Deficit numerically equals the total borrowing requirements of the government from all sources (including market borrowings, small savings, and external debt) to finance the excess expenditure.
Statement 3 is Correct: The formula for calculating Fiscal Deficit is:
Fiscal Deficit = Total Expenditure - (Revenue Receipts + Non-debt Capital Receipts).
Non-debt creating capital receipts (such as recovery of loans and proceeds from disinvestment) are included in the receipts calculation because they are genuine inflows that do not create future repayment obligations, unlike borrowings.

Key Takeaway

Fiscal Deficit reflects the total borrowing need of the government. It is calculated as Total Expenditure minus (Revenue Receipts + Non-debt Capital Receipts).

Your note

More from Chapter 7: Government Budget and the Economy

Consider the following statements regarding the "Annual Financial Statement" in India: 1. It is a statutory requirement under the Fiscal Responsibility and Budget Management Act, not the Constitution. 2. It includes estimates for the coming financial year. 3. It distinguishes between the revenue account and the capital account. Which of the statements given above is/are correct?

medium

With reference to the "Allocation Function" of the government budget, consider the following statements: 1. It addresses the provision of public goods that cannot be provided effectively by the market mechanism. 2. Public goods are characterized by being rivalrous in consumption and excludable in nature. 3. The "free-rider" problem is easily solved by charging a user fee for public goods. Which of the statements given above is/are correct?

medium

Consider the following statements regarding "Public Provision" and "Public Production": 1. Public provision implies that goods are financed through the budget and used without direct payment. 2. Goods provided by the government must necessarily be produced directly by the government. 3. Public goods may be produced by the private sector. Which of the statements given above is/are correct?

medium

Consider the following statements regarding "Capital Receipts": 1. Recovery of loans is considered a revenue receipt. 2. Capital receipts either create a liability or reduce the financial assets of the government. 3. Market borrowings are considered non-debt creating capital receipts. Which of the statements given above is/are correct?

hard

Consider the following statements regarding "Revenue Expenditure": 1. It includes expenditure that does not result in the creation of assets. 2. Interest payments on debt are classified as capital expenditure. 3. Grants given to state governments are treated as revenue expenditure even if they are meant for the creation of assets. Which of the statements given above is/are correct?

medium

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Correct Option

The correct option is 2 and 3 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect: Fiscal Deficit is defined as the difference between the government’s Total Expenditure and its Total Receipts excluding borrowings and other liabilities. If borrowings were included in "Total Receipts," the value would equal Total Expenditure (since the budget balances), resulting in a difference of zero.
Statement 2 is Correct: The Fiscal Deficit numerically equals the total borrowing requirements of the government from all sources (including market borrowings, small savings, and external debt) to finance the excess expenditure.
Statement 3 is Correct: The formula for calculating Fiscal Deficit is:
Fiscal Deficit = Total Expenditure - (Revenue Receipts + Non-debt Capital Receipts).
Non-debt creating capital receipts (such as recovery of loans and proceeds from disinvestment) are included in the receipts calculation because they are genuine inflows that do not create future repayment obligations, unlike borrowings.

Key Takeaway

Fiscal Deficit reflects the total borrowing need of the government. It is calculated as Total Expenditure minus (Revenue Receipts + Non-debt Capital Receipts).