Discussion
There are two statements for each question. In the light of these two statements, choose the most appropriate answer from the options given below.
Statement 1: Revenue Deficit is the excess of revenue expenditure over revenue receipts.
Statement 2: Effective Revenue Deficit is the difference between Revenue Deficit and Grants for Creation of Capital Assets.
Answer: A
Both Statement 1 and Statement 2 are correct.
Revenue deficit is the amount by which revenue expenditure exceeds revenue receipts, which is exactly Statement 1.
Effective revenue deficit, introduced in the Union Budget of 2011-12, removes from the revenue deficit the grants given to states and others for the creation of capital assets. Such grants are booked as revenue spending by the Centre, but they build assets, so taking them out gives a truer measure of consumption spending financed by borrowing. That is Statement 2.
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