Basically, the safe zone of deficit financing is judged by the degree of inflation it would cause. ADVERTISEMENTS: A mild degree of inflation, say up to a price rise of 3 per cent per annum, is considered tolerable and even essential in a developing economy.

revenue deficit

Deficit financing in advanced countries is used to mean an excess of expenditure over revenue—the gap being covered by borrowing from the public by the sale of bonds and by creating new money.

Deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds. The influence of government deficits upon a national economy may be very great.

Due to deficit financing money supply increases & the purchasing power of the people also increase which increases the aggregate demand and the prices also increase. 2. Adverse effect on saving: Deficit financing leads to inflation and inflation affects the habit of voluntary saving adversely.

Fiscal Deficit = total expenditure – total receipts except borrowings. Primary Deficit = Fiscal deficit- interest payments. Effective revenue Deficit-= Revenue Deficit – grants for the creation of capital assets. Monetized Fiscal Deficit = that part of the fiscal deficit covered by borrowing from the RBI.

While fiscal deficit is the difference between total revenue and expenditure, primary deficit can be arrived by deducting interest payment from fiscal deficit. Interest payment is the payment that a government makes on its borrowings to the creditors.

Primary Deficit shows the amount of government borrowings specifically to meet the expenses by removing the interest payments. Therefore, a zero Primary Deficit means the need for borrowing to meet interest payments.

A receipt is a document which is provided by a business to its customers every time a product or service is sold. It its a buyer’s proof of purchase. the date and time of the purchase. the number of items purchased and price totals. the name and location of the business the items have been bought from.

Common examples of revenue receipts Revenue received from sale of goods to customers. Income received as interest on a saving account. Dividend income received from shares of various companies. Rental income received by a company.

Recovery of loans is not an example of revenue receipts because revenue receipts refer to those money receipts which does not create a liability for the government or cause reduction in assets of the government.