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Q(1) If the budgetary deficit of gout is 25000 crors rs. and the borrowings and other liabilities are 7000 crores rs, how much will be the fiscal dificit.

Ans = 32000 crores

Explain why

we know Budget deficit = Total Expenditure - Total receipts. This means that if there is a budget deficit of 25,000 cr then expenditures are 25,000 more than the receipts. Also, the borrowings and liabilities are already included in the receipts here.

Now, further we know that fiscal deficit is Total Expenditure over Total Revenue (except borrowings). That means, now if the borrowings are 7,000 then the fiscal deficit will be 7,000 more than the budget deficit because we are excluding borrowings from the receipt and not the expenditures.

This can be further simply understood as follows:

If, Budget deficit = Total Expenditure - Total Receipt

i.e. 25,000 = x - y

and, Fiscal Deficit = TE - TR (excluding borrowings)

then,

Fiscal Deficit = x - (y - 7,000)

or, Fiscal Deficit = x - y + 7,000

or, putting the value for x-y, we get,

Fiscal Deficit = 25,000 + 7,000 = 32,000

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