Tag: public finance, budget and fiscal policy

The fiscal deficit is the difference between the total revenue and total expenditure of the government. Revenue deficit hence arises when the government's actual net receipts is lower than the projected receipts. So, the size of fiscal deficit is always higher than revenue deficit.

Central assistance to states is not a part of non-plan expenditure on the revenue side. Non-plan revenue expenditure is accounted for by interest payments, subsidies (mainly on food and fertilisers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments. 

Capital expenditure are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm. 

Government generates revenue which it uses to manage it towards public works to be done.

Plan expenditure is essentially the budget support to the Central Plan and the Central assistance to State and Union Territory plans. Like all budget heads, this is also split into revenue and capital components. Defense is not part of plan expenditure.

Any expenditure that is incurred on programmes which are detailed to state for their plans is called planned expenditure. The estimated expenditure provided in the budget for spending during the year on routine functioning of the government is unplanned expenditure. So capital expenditure comprises both.

The budget deficit is the difference between current government's spending on goods and services and total current revenue from all types of taxes net of transfer payments.