Question : Assertion (A): Fiscal deficit is greater than budgetary deficit.
Reason (R): Fiscal deficit is the borrowing from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.
Option 1:
Both A and R are true and R is the correct explanation of A
Option 2: Both A and R are true but R is not a correct explanation of A
Option 3: A is true but R is false
Option 4: A is false but R is true
Correct Answer:
Both A and R are true and R is the correct explanation of A
Solution :
The correct answer is (a) Both A and R are true and R is the correct explanation of A.
The fiscal deficit represents the total borrowing by the government from various sources, including the Reserve Bank of India and other liabilities, to cover its expenditure. It encompasses the budgetary deficit and any additional borrowings made by the government.
The budgetary deficit, on the other hand, refers specifically to the difference between the government's planned expenditure and planned revenue in the budget. It does not take into account the additional borrowings or liabilities.
As a result, the fiscal deficit is generally greater than the budgetary deficit since it includes the budgetary deficit as well as any extra borrowing and liabilities incurred by the government.
Therefore, the correct answer is (a) Both A and R are true and R is the correct explanation of A.
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