How do revenue, fiscal and primary deficit impact economy?

A revenue deficit shows a shortage of funds with the government to maintain its day-to-day affairs. When total revenue expenditure exceeds total revenue receipts it leads to a revenue deficit. The Centre often resorts to borrowings and divestments to make up for this gap in revenue, alongside the introduction of new or increasing taxes.

Meanwhile, the fiscal deficit is the negative balance that arises whenever the govt spends more money than it receives. The number is keenly observed during the Budget as the size of the deficit may affect growth, price stability, cost of production, and inflation. At times, a sustained high fiscal deficit can impact a country's rating. An increase in the fiscal deficit, however, can also boost a sluggish economy by giving more money to people who can then buy and invest more.

A primary deficit shows the government's borrowings to meet interest payments. Therefore, a shrinking primary deficit points to the recovering fiscal health of an economy. Primary deficit is arrived at by deducting interest payments on previous borrowings from the current year's fiscal deficit.