Statement 1: Revenue Deficit is the excess of revenue expenditure over revenue receipts. Statement 2: Effective Revenue Deficit is the difference between Revenue Deficit and Grants for the creation of Capital Assets. Choose the correct answer: (A) Both Statement 1 and Statement 2 are correct (B) Both Statement 1 and Statement 2 are incorrect (C) Statement 1 is correct and Statement 2 is incorrect (D) Statement 1 is incorrect and Statement 2 is correct
Question:
Statement 1: Revenue Deficit is the excess of revenue expenditure over revenue receipts. Statement 2: Effective Revenue Deficit is the difference between Revenue Deficit and Grants for the creation of Capital Assets. Choose the correct answer: (A) Both Statement 1 and Statement 2 are correct (B) Both Statement 1 and Statement 2 are incorrect (C) Statement 1 is correct and Statement 2 is incorrect (D) Statement 1 is incorrect and Statement 2 is correct
Statement 1: Revenue Deficit is the excess of revenue expenditure over revenue receipts. Statement 2: Effective Revenue Deficit is the difference between Revenue Deficit and Grants for the creation of Capital Assets. Choose the correct answer: (A) Both Statement 1 and Statement 2 are correct (B) Both Statement 1 and Statement 2 are incorrect (C) Statement 1 is correct and Statement 2 is incorrect (D) Statement 1 is incorrect and Statement 2 is correct
Options
Answer: (A) Both Statement 1 and Statement 2 are correct
Explanation:
Both statements are correct. Revenue Deficit = Revenue Expenditure − Revenue Receipts; it indicates the government is borrowing to meet day-to-day expenses. Effective Revenue Deficit (introduced in Union Budget 2011-12) = Revenue Deficit − Grants for Creation of Capital Assets. The concept of Effective Revenue Deficit was introduced to provide a more realistic picture of the revenue deficit by excluding grants given to states/UTs that are used for capital asset creation, which have a productive use despite being classified as revenue expenditure.
Explanation:
Both statements are correct. Revenue Deficit = Revenue Expenditure − Revenue Receipts; it indicates the government is borrowing to meet day-to-day expenses. Effective Revenue Deficit (introduced in Union Budget 2011-12) = Revenue Deficit − Grants for Creation of Capital Assets. The concept of Effective Revenue Deficit was introduced to provide a more realistic picture of the revenue deficit by excluding grants given to states/UTs that are used for capital asset creation, which have a productive use despite being classified as revenue expenditure.
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