Public FinancePYQ - July 2021 (Inter)Question 127 of 20
All Questions

Which deficit indicates the borrowing requirement of the government?

Options

ARevenue Deficit
BFiscal Deficit
CPrimary Deficit
DMonetized Deficit
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Correct Answer

✅ Option b — Fiscal Deficit

All Options:

  • ARevenue Deficit
  • BFiscal Deficit
  • CPrimary Deficit
  • DMonetized Deficit

Detailed Solution & Explanation

To determine the borrowing requirement of the government, we need to understand the different types of deficits. • The government's fiscal deficit is the difference between its total expenditure and total revenue, including borrowing. • This means that the fiscal deficit represents the amount by which the government's spending exceeds its revenue, which is met by borrowing. • The borrowing requirement of the government is essentially the amount it needs to borrow to finance its expenditure, which is reflected in the fiscal deficit. The correct answer is based on the definition of fiscal deficit, which is a key concept in public finance. • Revenue deficit and primary deficit are related but distinct concepts, with revenue deficit referring to the difference between revenue expenditure and revenue receipts, and primary deficit referring to the fiscal deficit minus interest payments. • These are not direct measures of the government's borrowing requirement, making them incorrect options.

About This Chapter: Public Finance

Paper

Paper 4: Business Economics

Weightage

10%

Key Topics

Fiscal Policy, Budget, Market Failure

This chapter deals with government finances — how the government earns (taxation) and spends (expenditure) money. Key topics include Fiscal Policy, types of taxes (Direct and Indirect), the Union Budget, Public Debt, and the concept of Market Failure and how government intervention corrects it.

View Official ICAI Syllabus

Exam Strategy Tip

Focus on the difference between Revenue and Capital items in the budget. Understand Fiscal Deficit and its implications. Tax-related MCQs are commonly asked.

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