Explain revenue deficit.

Revenue deficit is excess of total revenue expenditure of the government over its total revenue receipts. Revenue deficit = Total Revenue expenditure – Total Revenue receipts. When the government incurs a revenue deficit, it implies that the government is dissaving and is using up the savings of the other sectors of the economy to finance a part of its consumption expenditure. This situation means that the government will have to borrow not only to finance its investment but also its consumption requirements. This will lead to a build up of stock of debt and interest liabilities and force the government, eventually, to cut expenditure.