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Budget & fiscal deficits — the pipeline, live
Two things the exam tests every year, made manipulable. First, the one rule that sorts every budget line into revenue or capital — try it in Test mode. Then a budget you set yourself, read four ways: switch between fiscal, revenue, effective revenue and primary deficit and watch which lines count and which are subtracted. From Smaranly's own Fiscal Policy lesson.
Revenue or capital?
One rule sorts everything. A receipt is capital if it creates a liability or reduces an asset. An expenditure is capital if it creates an asset or reduces a liability. Everything else is revenue — including the two largest lines in the budget.
Receipts
- GST collectionsrevenue
Tax revenue — no liability created, no asset reduced.
- Corporate taxrevenue
Tax revenue.
- Income taxrevenue
Tax revenue.
- RBI dividendrevenue
Non-tax revenue — a return on holdings, not a sale of them.
- Disinvestment proceedscapital
Selling PSU shares reduces a government asset.
- Market borrowingscapital
Creates a liability — and it is the one capital receipt excluded from the fiscal-deficit base.
- Loan recoverycapital
A loan repaid to government reduces its financial asset.
- Small savingscapital
Deposits the government owes back — a liability.
Expenditure
- Salaries and pensionsrevenue
Consumption — creates no asset.
- Interest paymentsrevenue
Huge, but revenue: servicing debt creates no asset and retires none.
- Food and fertiliser subsidiesrevenue
Transfers — no asset created.
- Highway constructioncapital
Creates a physical asset.
- Loans to statescapital
Creates a financial asset (a claim on the state).
- Debt repaymentcapital
Reduces a liability.
One budget, four deficits
Move the sliders to set a budget. Switch the definition and watch the same bars recolour: what counts, what is subtracted. The number is computed by exactly the formula shown.
Fiscal Deficit
Total Expenditure − Total Receipts (excluding borrowings)
150deficit
Signals: Total borrowing requirement
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