Effective Revenue Deficit

The definition of the revenue expenditure is that it must not create any productive asset. However, this creates a problem in accounts. There are several grants which the Union Government gives to the state / UTs and some of which do create some assets, which are not owned by union government but by state government.

Revenue Deficit

If total Revenue receipts are more than total revenue expenditure, it is called revenue surplus. If the total revenue receipts are less than total revenue expenditures, it is called Revenue Deficit. Implications of Revenue Deficit and Revenue Surplus on Economy Revenue expenditures are a consumptive kind of expenditures and that is why the Governments try

Components of Revenue Expenditure

While the Revenue Receipts are those incomes of the Government which don’t create additional liability, the Revenue Expenditures are those expenditures which don’t create any productive assets. The money in these expenditures goes either in running administration / operation of government or in welfare schemes which don’t result in creation of assets. Specific examples are

Tax and Non-Tax Revenue Receipts

The term “Revenue Receipt” is made up of two words revenue and receipts. Any income that does not generate a liability is revenue. For example, if the Government borrows money from World Bank, it will increase its liabilities (because this money has to be paid back)- so cannot be called revenue. However, if the government