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ABM CASE STUDY ON REVENUE AND FISCAL DEFICIT | CAIIB ABM STUDY MATERIAL 2022

ABM CASE STUDY ON REVENUE AND FISCAL DEFICIT 

In this article, we have provided the ABM Case Studies on revenue and fiscal deficit the important concept of Advanced Bank Management for CAIIB 2022.

In this post, we will provide you with some important case studies on the Revenue & Fiscal Deficit for practice from the Advanced Bank Management syllabus Dec 2022 along with the meaning of the Revenue Deficit & Fiscal Deficit to first clear the concepts.

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CAIIB ADVANCED BANK MANAGEMENT PAPER | IIBF 2022 EXAMS

As the Certified Associate of the Indian Institute of Bankers (CAIIB) December Exams are due from 27th of November 2022 (Yes, November), it’s time that the bankers who are thinking of preparing the Certified Associate of the Indian Institute of Bankers 2022 Exams start preparing for the same!

Even though registrations will open in the end of September, Future CAIIBs must not waste their any more time to begin with the 2022 Exam preparations.

So, let us start with the CAIIB topic:

Revenue Deficit & Fiscal Deficit

 

MEANING OF REVENUE DEFICIT & FISCAL DEFICIT

REVENUE DEFICIT

A Realized net income cannot exceed projected net income, thus there is a revenue deficit. In this situation, actual revenue and expenditures differ from budgeted revenue and expenditures. In contrast to a revenue surplus, which occurs when actual net income exceeds projected income.

There are transactions that directly affect the government’s current income and expenditures when actual revenue and/or expenditures do not correspond to budgeted amounts.

FISCAL DEFICIT

The fiscal deficit is the difference between a government’s income and its expenditures. In a fiscal deficit, the government spends more than it can afford.

Generally, a fiscal deficit is calculated as a percentage of gross domestic product (GDP), or as the amount spent over income. Income is only calculated based on taxes and other revenues and does not include borrowed funds.

There is a difference between a fiscal deficit and a fiscal debt. In the latter case, it refers to the debt accumulated over a long period of deficit spending.

Now that you have undergone through the meaning of Revenue Deficit & Fiscal Deficit, you can move on to the Case studies on the topic.

 

IMPORTANT CASE STUDIES ON REVENUE DEFICIT & FISCAL DEFICIT

Case Study on REVENUE AND FISCAL DEFICIT No.1:

You are given the Receipts and Expenditures of the Central Government as per 2018-19 Budget:

  1. Revenue Receipts = Rs. 1725738
  2. Tax Revenue = Rs. 1480649
  3. Non-Tax Revenue = Rs. 245089
  4. Capital Receipts = Rs. 716475
  5. Recovery of Loans = Rs. 12199
  6. Other Receipts = Rs. 80000
  7. Borrowings and Other Liabilities = Rs. 624276
  8. Expenditure On Revenue Account of which = Rs. 2141772
  9. Interest Payments = Rs. 575795
  10. Grants in Aid for creation of capital assets = Rs. 195345
  11. Expenditure On Capital Account = Rs. 300441

 

You need to calculate the following: 

Q1. Calculate the Total Receipts.

  1. Rs. 2075416
  2. Rs. 2146735
  3. Rs. 2442213
  4. Rs. 2536289

 

Q2. Calculate the Total Expenditure

  1. Rs. 2075416
  2. Rs. 2146735
  3. Rs. 2345425
  4. Rs. 2442213

 

Q3. Calculate the Revenue Deficit

  1. Rs. 416034
  2. Rs. 220689
  3. Rs. 624276
  4. Rs. 48481

 

Q4. Calculate the Effective Revenue Deficit

  1. Rs. 416034
  2. Rs. 220689
  3. Rs. 624276
  4. Rs. 48481

 

Q5. Calculate the Fiscal deficit

  1. Rs. 416034
  2. Rs. 220689
  3. Rs. 624276
  4. Rs. 48481

 

Q6. Calculate the Primary Deficit

  1. Rs. 416034
  2. Rs. 220689
  3. Rs. 624276
  4. Rs. 48481

 

Solution to case study no. 1:

  1. III

Sol: Total Receipts = 

= Revenue Receipts + Capital Receipts

= Rs. 1725738 + Rs. 716475

= Rs. 2442213

 

  1. IV

Sol: Total Expenditure =

= Revenue Expenditure + Capital Expenditure

= Rs. 2141772 + Rs. 300441

= Rs. 2442213

 

  1. I

Sol: Revenue Deficit = 

= Revenue Expenditure – Revenue Receipts

= Rs. 2141772 – Rs. 1725738

= Rs. 416034

  1. II

Effective Revenue Deficit = 

= Revenue Deficit – Grants in Aid for creation of capital assets

= Rs. 416034 – Rs. 195345

= Rs. 220689

 

  1. III

Sol: Fiscal deficit = 

= Total Expenditure – Total Receipts net of Borrowings (Revenue Receipts + Recovery of Loans + Other Receipts)

= Rs. 2442213 – (Rs. 1725738 + Rs. 12199 + Rs. 80000)

= Rs. 624276

 

  1. IV

Sol: Primary Deficit = 

= Fiscal deficit – Interest payments

= Rs. 624276 – Rs. 575795

= Rs. 48481

 

Case Study on REVENUE AND FISCAL DEFICIT No. 2:

You are given the Receipts and Expenditures of the Central Government as per 2017-18 (As percentage of Gross Domestic Product) below:

  1. Revenue Receipts (a + b) = 8.70%
  1. Tax revenue (net of states share) = 7.30%
  2. Non-tax revenue = 1.40%
  1. Revenue Expenditure of which = 12.30%
  1. Interest payments = 3.10%
  2. Major subsidies = 2.40%
  3. Defence expenditure = 1.10%
  1. Capital Receipts (a + b + c) of which = 5.20%
  1. Recovery of loans = 0.20%
  2. Other receipts (mainly Public Sector Units disinvestment) = 0.30%
  3. Borrowings and other liabilities = 4.7%
  1. Capital Expenditure = 1.60%

Using the above data, you need to calculate the following:

 

Q1. Calculate the Total Receipts (in %).

  1. 4.7
  2. 5.2
  3. 8.7
  4. 13.9

Q2. Calculate the Total Expenditure (in %).

  1. 1.6
  2. 5.5
  3. 12.3
  4. 13.9

Q3. Calculate the Revenue Deficit (in %).

  1. 1.6
  2. 3.6
  3. 4.7
  4. 8.7

Q4. Calculate the Fiscal deficit (in %).

  1. 1.6
  2. 3.6
  3. 4.7
  4. 8.7

Q5. Calculate the Primary Deficit (in %).

  1. 1.6
  2. 3.6
  3. 4.7
  4. 8.7

 

Solution to case study no. 2:

  1. iv i.e. Total Receipts = Revenue Receipts + Capital Receipts

= 8.70% + 5.20%

= 13.90%

  1. iv i.e. Total Expenditure = Revenue Expenditure + Capital Expenditure

= 12.30% + 1.60%

= 13.90%

  1. ii i.e. Revenue Deficit = Revenue Expenditure – Revenue Receipts

= 12.30% – 8.70%

= 3.60%

  1. iii i.e. Fiscal deficit = Total Expenditure – Total Receipts net of Borrowings and other liabilities

= 13.90% – (8.70% + 0.20% + 0.30%)

= 13.90% – 9.20%

= 4.70%

  1. i i.e. Primary Deficit = Fiscal deficit – Interest payments

= 4.70% – 3.10%

= 1.60%

 

Case Study on REVENUE AND FISCAL DEFICIT No. 3:

You are provided with the following data: 

(i) Borrowing by the government = Rs. 600 lacs

(ii) Revenue receipts = Rs. 100 lacs

(iii) Capital receipts = Rs. 750 lacs

(iv) Interest payment by the government = Rs. 150 lacs

 

Q1. Calculate the Fiscal deficit.

  1. Rs. 150 lacs
  2. Rs. 300 lacs
  3. Rs. 450 lacs
  4. Rs. 600 lacs

Q2. Calculate the Primary Deficit

  1. Rs. 150 lacs
  2. Rs. 300 lacs
  3. Rs. 450 lacs
  4. Rs. 600 lacs

 

Ans – 1-d, 2-c

Solution:

  1. iv i.e. Fiscal Deficit = Borrowing by the government

= Rs. 600 lacs

  1. iii i.e. Primary Deficit = Fiscal deficit – Interest payment by the government

= Rs. 600 lacs – Rs. 150 lacs

= Rs. 450 lacs

 

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