Fiscal Deficit : In the budget, if the government’s expenditure is more than its revenue receipts and non-debt capital receipts, it is called fiscal deficit. Here non-debt capital revenue refers to the revenue generated through repayment of loans the government had given to the states and the revenue generated through disinvestment.
The total expenditure of the government includes its revenue expenditure and capital expenditure. Fiscal deficit indicates the actual burden that will be imposed on the government treasury. In other words, it indicates how much loan the government has to take from internal and external sources.
When the government is not able to overcome the fiscal deficit even after taking loans, the Reserve Bank of India gives a loan to the government in the form of printing notes and putting them into circulation. Fiscal deficit can be shown in the form of a formula in this manner:
Fiscal deficit = (Revenue receipts + Non-debt Capital Receipts) – Total Expenditure