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CSEET · Economic and Business Environment · Indian Union Budget

A persistently large revenue deficit in the Union Budget is considered undesirable mainly because it indicates that the government:

A large revenue deficit is undesirable because the government borrows to meet its current, consumption-type spending. Such borrowing adds to liabilities without creating assets and leaves fewer resources for productive capital investment.

  1. AIs collecting more tax than it spends
  2. BIs borrowing to finance current consumption, leaving less for asset creationCorrect
  3. CHas no capital expenditure at all
  4. DIs earning surplus non-tax revenue

Explanation

A revenue deficit means revenue receipts fall short of revenue expenditure, so borrowing is used to meet current consumption-type spending. This adds to liabilities without creating assets and reduces resources available for capital formation. The other options describe a surplus or are incorrect.

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