18.6          ndian       onom
                 alleviation, etc.) and general services (tax               Revenue deficit may be shown in the
                 collection, etc.);                                    quantitative form (as how much the gross/total
        (viii) Grants given by the government to Indian                deficit is in currency terms) or in percentage
                 states and foreign countries.                         terms of the GDP for that particular year (shown
                                                                       as percentage of GDP). Usually, it is shown as a
     revenue Deficit                                                   percentage of the GDP for domestic as well as
                                                                       international analyses.
     If the balance of total revenue receipts and total
     revenue expenditures turns out to be negative it is               effective revenue Deficit
     known as revenue deficit, a new fiscal terminology
                                                                       Effective revenue deficit (ERD) is a new term
     used since the fiscal 1997–98 in India.8
                                                                       introduced in the Union Budget 2011–12.
           This shows that the government’s Revenue                    Conventionally, ‘revenue deficit’ (RD) is the
     Budget (see the next topic) is running in losses                  difference between revenue receipts and revenue
     and the government is earning less revenue and                    expenditures. Here, revenue expenditures includes
     spending more revenues—incurring a deficit.                       all the grants which the Union Government
     Revenue expenditures are of immediate nature (this                gives to the state governments and the UTs—
     has to be done) and since they are consumptive/                   some of which create assets (though these assets
     non-productive they are considered as a kind of                   are not owned by the Government of India but
     expenditure which sums up to a heinous crime in                   the concerned state governments and the UTs).
     the area of fiscal policy. Governments fulfil the                 According to the Finance Ministry (Union Budget
     gap/deficit with the money which could have been                  2011–12), such revenue expenditures contribute
     spent/intvested in productive areas.                              to the growth in the economy and therefore,
           A government might have its revenue                         should not be treated as unproductive in nature like
                                                                       other items in the revenue expenditures. And on
     expenditures less than its revenue receipts, i.e.,
                                                                       this logic, a new methodology was introduced
     having (revenue surplus) budget. Such fiscal policy
                                                                       to capture the ‘effective revenue deficit’, which
     is considered good where the government has been
                                                                       is the Revenue Deficit ‘excluding’ those revenue
     able to manage some money out of its revenue
                                                                       expenditures of the Government of India which
     budget which could be spent for the creation of                   were done in the form of GoCA (grants for
     productive assets. Yes, another thing that should be              creation of capital assets).
     kept in mind, as how the government has managed
                                                                            The GoCA includes the Government of
     this surplus and whether the policies which made
                                                                       India grants forwarded to the states & UTs for
     this happen are judicious enough or not. In the                   the implementation of the centrally sponsored
     Second Plan, India emerged as a revenue-suplus                    programmes such as Pradhan Mantri Gram
     state, but experts did not appreciate it as it had                Sadak Yojana, Accelerated Irrigation Benefit
     many bad impacts on the economy—higher                            Programme, Jawaharlal Nehru National Urban
     tax rates culminated in tax evasion, corruption,                  Renewal Mission, etc., these expenses though
     creation of black money, etc.                                     they are shown by the Government of India in
                                                                       its Revenue Expenditures they are involved with
         8.     a a . Chelliah, he eaning and Significance of the
               iscal eficit , in Amaresh aghi ed. , Readings in Public
                                                                       asset creation and cannot be considered completely
              Finance, (New Delhi: Oxford University Press, 2005),     ‘unproductive’ like other items put in the basket
              pp. 387–88. Also see Ministry of Finance, Union Budget   of the Revenue Expenditures—the reason why a
              1997–98, (New Delhi: Government of India, 1997).         new ‘terminology’ was created.