Union Budget and Fiscal Policy

Fiscal Deficit is the difference between the government's total expenditure and its total non-debt receipts. It shows how much money the government needs to borrow from the market. For example, if the government earns 10 lakh crores but spends 15 lakh crores, the 5 lakh crore gap is the Fiscal Deficit. High deficit can lead to inflation and higher interest rates.

This is the most important fund of the government. All revenues received, loans raised, and money received from loan repayments go into this fund. Article 266(1) of the Constitution defines it. Most importantly, the government cannot spend any money from this fund without an 'Appropriation Act' passed by the Parliament. Salaries of the President and Judges are 'charged' on this fund.

Revenue expenditure is for the regular functioning of government departments. It includes interest payments, subsidies, and salaries. It does not create any assets. Capital expenditure is for creating assets like hospitals or repaying old loans. For example, paying a teacher's salary is Revenue Expenditure, but building the school building is Capital Expenditure.