Q. Which of the following statement related to Effective Revenue Deficit is correct?

[A] It is the difference between the revenue deficit and the grants for creation of capital assets

[B] It is the difference between revenue expenditure and revenue receipts without an increase in the assets of the Government

[C] It refers to the grants-in-aid given by the Central Government to the State Governments for the creation of capital assets that are owned by the said entities

[D] None of the above

Answer: A
Notes:

Effective Revenue Deficit

  • Effective Revenue Deficit is the difference between revenue deficit and grants for the creation of capital assets. In other words, the Effective Revenue Deficit excludes those revenue expenditures which were done in the form of grants for the creation of capital assets
  • Effective Revenue Deficit signifies the amount of capital receipts that are being used for actual consumption expenditure of the Government

Source: Ramesh Singh

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