Deficit

The basic meaning of the term deficit is a shortage.

This shortage can be in terms of revenue when compared to the costs or in terms of returns as compared to the investment made.

To correctly compute the amount of deficit, one has to compare the amount of revenues or credits available to the total expenses or debits incurred during a specific period of analysis. There are many types of deficits that could be faced at an individual level or an entity or organisation level.

Types of deficits

Fiscal Deficit – Excess of government expenditure over total receipts but excluding the borrowings.

Primary Deficit – Fiscal deficit of the current year reduced y the interest payments of previous borrowings.

Revenue deficit – Excess of revenue expenditure over the revenue receipts of the government.

Budget deficit – Excess of total expenditure over the total receipts or revenues during the fiscal year.

Effective Revenue Deficit – Revenue deficit calculated minus the grants for the creation of capital assets during the specified period.

Monetized Fiscal Deficit – The portion of the fiscal deficit which is to be covered by the RBI borrowing.