Revenue Deficit

A revenue deficit arises when a government’s or organization’s revenue receipts (income from taxes, fees, and other regular sources) are insufficient to cover its revenue expenditures (day-to-day operational expenses such as salaries, subsidies, and interest payments). It indicates that the entity is not generating enough income to meet its routine expenses, leading to reliance on borrowing or asset sales to fund operations. This differs from a fiscal deficit, which measures the overall gap between total expenditure and total receipts (excluding borrowings), representing the government’s total borrowing requirement.

Example: If a government earns ₹10 lakh in revenue receipts but spends ₹12 lakh on recurring expenses, it faces a revenue deficit of ₹2 lakh.