Is an economic phenomenon, where the Government's total expenditure surpasses the revenue generated .

It is the difference between the government's total receipts (excluding borrowing) and total expenditure. Fiscal deficit gives the signal to the government about the total borrowing requirements from all sources.

Borrow from the citizens. or From other countries or Organisations like the World Bank or The IMF.

1. increase the amount of taxes collected by

increasing the tax rates;

2. help stimulate economic growth so that tax collection automatically increases with it; or

3. print new currency notes to pay back the debt also called debt monetization.

Suppose that there is only one commodity that everyone needs to buy in order to live a good life say wheat. Also, assume that our country produces ten thousand quintals of wheat every year. There are a total of twenty five thousand people in the country who spend Rs. 400 each per year to buy wheat. Thus total amount of money spent to buy wheat is Rs. 1 crore. Since this Rs. 1 crore is spent to purchase ten thousand quintals of wheat, the cost of wheat is Rs. 1,000per quintal.

Now suppose that to repay some of it's debt, the Government decides to print some new currency notes. Say the Government prints new notes worth Rs. 10 lacs. This means the amount of money available to spend increases from Rs. 1 crore to Rs. 1.1 crores. Since the amount of wheat produced hasn't increased, each tonne of wheat now costs Rs. 1,100, a 10% increase! (1.1 crores paid for ten thousand quintals = Rs. 1,100 per quintal). So we have just seen that the effect of debt monetization is inflation, which acts like an invisible tax on all the people of a country.

Also suppose that this programme led to an increase in wheat production from 10,000 quintals to 11,000 quintals. In that case, even with an increase of money to 1.1 crores, the cost of wheat would remain steady at Rs. 1,000 per quintal. Thus we'd have economic growth and also avoid inflation.

When the net amount received (revenues less expenditures) falls short of the projected net amount to be received. This occurs when the actual amount of revenue received and/or the actual amount of expenditures do not correspond with predicted revenue and expenditure figures. This is the opposite of a revenue surplus, which occurs when the actual amount exceeds the projected Amt.

Revenue deficit: It is an economic phenomenon, where the net amount received fails to meet the predicted net amount to be received. Revenue deficit occurs when the actual amount of expenditure and actual amount of received revenue do not tally with the anticipated expenditure and revenue figures.

For example, consider an organization with budgeted revenue of $325,000 and budgeted expenditures of $200,000, which equates to a net amount of $125,000. During the fiscal year, the organization's total revenue is actually $300,000, while its total expenditure is $195,000. The net amount received by the organization is $105,000, which is $20,000 less than the projected receipt of $125,000. Therefore, although the organization generated a positive net amount of proceeds, it fell short of the projected amount, creating a revenue deficit.

For example, if an establishment's projected revenue is $400,000 and projected expenditures are $100,000, then the establishment expects to obtain a net amount of $300,000. During the fiscal year, the total revenue obtained by that establishment is $350,000 and it's total expenditure is $95,000. Then the net amount obtained by that establishment will be $255,000, which is $45,000 less than the estimated receipt of $300,000. In that case, it can be said that the establishment created a revenue deficit of $45,000.