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What is Effective Revenue Deficit?

13. What is Effective Revenue Deficit?

1. The shortfall in a government's income compared with its spending
2. Difference between the current year's fiscal deficit and interest payment on previous borrowings
3. Difference between revenue deficit and grants for creation of capital assets
4. Purchase of government bonds by the central bank to finance the spending needs of the government

Answer: C) Difference between revenue deficit and grants for creation of capital assets

Explanation:

The idea of an effective revenue deficit has been proposed by the Rengarajan Committee on Public Expenditure. It is intended to deduct the cash utilized out of getting to back capital consumption. The idea has been acquainted with learning the real deficiency in the income account after adapting to consumption of capital nature. Zeroing in on this will help in diminishing the destructive part of income deficiency and make space for expanded capital spending.