With reference to public finance in India, consider the following statements: 1. Capital Deficit is a formally recognized term in Indian public finance used to describe shortfalls in capital expenditure. 2. Fiscal Deficit reflects the gap between the government’s total receipts and total expenditures, including both revenue and capital components. 3. A high fiscal deficit indicates that the government is financing part of its expenditure through borrowings or other liabilities. Which of the statements given above is/are correct? |ForumIAS

[A] 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: B

Notes:

Explanation:

The term “Capital Deficit” is not a recognized term in formal public finance or economics. Though commonly used in media to refer to capital shortage or capital crunch, it does not exist in official fiscal classification.
Fiscal Deficit is the difference between total expenditure (revenue + capital) and total receipts (revenue + non-debt capital receipts). It represents the total borrowing requirement of the government.
A high fiscal deficit implies that the government is spending more than its earnings, and the deficit is being financed by borrowings or creation of other liabilities.

Source- TMH Indian Economy by Ramesh Singh

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