The document discusses government budgets, deficits, and deficit financing. It defines different types of budgets - revenue and capital - and budget receipts and expenditures. It then defines and explains different types of deficits a government can run, including revenue, capital, fiscal, primary, effective revenue, and monetary deficits. It concludes by outlining the typical priority sources for deficit financing: external aid, grants, borrowings, internal borrowings, and printing currency as a last resort.

1. BUDGET, DEFICIT
AND DEFICIT
FINANCING

2. BUDGET
• TYPES OF BUDGET
• 1) REVENUE BUDGET
• 2) CAPITAL BUDGET
Direct tax General Services Subsidy
Indirect tax Fee, penalty, fine etc. Salary, Pension
Interest Defence(repair of Existing Machinery)
Grants Law & Orders
Interest Payments
Grant (External & Internal)
1. REVENUE BUDGET
REVENUE RECEIPTS REVENUE EXPENSES
TAX RECEIPTS
NON TAX
RECEIPTS

3. • Borrowings Loan given
• Disinvestment Loan Payment
• PF, KVP, Post office saving schemes, Defence Equipment purchase
• NSC General Services (Hospital ,
• Loan Recovery Educational Institute, Hydro Projects )
2. CAPITAL BUDGET
CAPITAL RECEIPTS CAPITAL EXPENDITURE

4. RECEIPTS
CAPITAL RECIPTS
REVENUE RECIPTS
CAPITAL EXP.
REVENUE EXP.
EXPENDITURE
NO LIABILITY
CREATION /
NO ASSETS LOSS
LIABILITY
CREATION / ASSET
LOSS
NO LIABILITY
CREATION / NO
INCOME / NO
ASSET CREATION
ASSET CREATION /
SOURSE OF
INCOME

5. DEFICIT and DEFICIT FINANCING
•DEFICIT: Status of financial health in which
expenditure exceeds revenue . When referring to accrued
federal government deficits , the term “ National Debt” is
used. (National Debt: The total outstanding borrowings of a
nations central government )
• TYPES OF DEFICITS
• 1. Revenue Deficit 2. Capital Deficit
• 3. Fiscal Deficit 4. Primary Deficit
• 5. Effective Revenue Deficit 6. Monestic Deficit

6. • 1. REVENUE DEFICIT:
• 2. CAPITAL DEFICIT:
(Investment by domestic economy in foreign assets is less than
foreign investment in domestic assets)
3. FISCAL DEFICIT:
OR
BUDGETARY DEFICIT- BORROWINGS
It actually calculate the borrowings of a nation.
Revenue Expenditure – Revenue Receipts
Capital Receipts- Disbursement on Capital Account
Total Expenditure (Excluding Borrowings)- Total
Receipts

7. • 4.BUDGETARY DEFICIT: This deficit will always be
ZERO.
• 5. PRIMARY DEFICIT:
• (PD indicates that how much of the government borrowings
are going to meet expenses other than the interest payments
(interest on old/ previous years borrowings )
• 6. EFFECTIVE REVENUE DEFICIT:
• GOCA: Grant to states for creation of capital assets
• Introduced in 2011
Total income – Total Expenditure
Fiscal deficit- Interest Payments
Revenue Deficit- GOCA

8. • Grant : Interest used in subsidy , salary etc. and for asset
creation like purchase of buses by state governments.
• 7. MONESTIC DEFICIT: It is the borrowings
made from RBI through printing fresh currency .
It is used as last resort when govt. cannot
borrow from market .

9. DEFICIT FINANCING
The following sources used for deficit financing priority wise:
• 1) External Aid:
Soft Loan from World Bank , IMD, NDB, ADB etc.
• 2) External Grants :
• 3) External Borrowings :
• 4) Internal Borrowings :
From RBI or other banks but this leads to crowding out
effect ( Means less fund will be remains available to
general public )
• 5) Printing Currency :
Last Option because it can lead to inflation.

10. THANKING YOU
SUNEHA SHARMA
COMPANY SECRETARY , LL.B ,
MCOM