What is the meaning of budgetary deficit?

Budgetary deficit is an important indicator of the financial health of the country. The sum of deficits of revenue account and the capital account comprise the budgetary deficit. Revenue account deficit is equal to the excess of revenue expenses to revenue receipts. Likewise, the excess of capital disbursements of the government over the capital receipts is known as the deficit in the capital account.

In other words, the budgetary deficit arises when the government spends more than it earns via taxes over a particular time period. Also, a reduction in the rate of taxes will also lead to a deficit if the spending is not scaled down accordingly. In addition, periods of economic downturn or growth also have an effect on the budgetary deficit.

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