PIB News Analysis 27th April 2020

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  1. Revenue Deficit :-Revenue deficit is the gap between the consumption expenditure (revenue expenditure) of the Government (Union or the State Governments) and its current revenues (revenue receipts). It also indicates the extent to which the government has borrowed to finance the current expenditure. Revenue receipts consist of tax revenues and non-tax revenues. Tax revenues comprise proceeds of taxes and other duties levied. The expenditure incurred for normal running of government functionaries, which otherwise does not result in creation of assets is called revenue expenditure.Examples of revenue expenditure are Interest Payments and Servicing of Debt, Pensions and (Union government’s) expenditure on Grants-in-Aid and contributions to States and Union Territories (State Governments too incur expenditure towards Grants-in-Aid and contribution to their Local Bodies). Even though some of these grants may be used for creation of assets, all grants given by the Union Government to State Governments/Union Territories and other entities are also treated as revenue expenditure.In the Union Budget (2011-12) a new methodology of capturing the ‘effective revenue deficit’ has been worked out, which takes into account those expenditures (transfers) in the form of grants for creation of capital assets.Elimination of the revenue deficit has been a priority for Governments, both the Union and at the State-levels, as a revenue deficit may pre-empt resources which otherwise would be available for capital investments. Implementation of Fiscal Responsibility and Budget Management (FRBM) legislation during the period 2005-10 has helped Governments to reduce their revenue deficits to a considerable extent. The global slowdown in 2008-09 and 2009-10, however, affected the consolidation process.
  2. Fiscal deficit is the difference between revenue receipts plus non-debt capital receipts on the one side and total expenditure including loans, net of repayments, on the other. It measures the gap between the government consumption expenditure including loan repayments and the anticipated income from tax and non-tax revenues. It also indicates the borrowing requirements of the government from all sources. The bigger the gap the more the government will have to borrow or resort to printing money to make both ends meet. Indiscriminate borrowings will push the economy into debt trap, while too much deficit financing may be inflationary. Increasing fiscal deficit over a period of time means government expenditure is rising faster than its revenues.


3. RBI steps in to ease liquidity pressure on Mutual Funds:-

To ease liquidity pressures on mutual funds, the Reserve Bank of India has announced a Special Liquidity Facility of ₹50,000 crore for Mutual Funds. Under this facility, the RBI will provide funds to banks at lower rates and banks can avail of funds for exclusively meeting the liquidity requirements of mutual funds.

Under the special liquidity facility scheme effective today, the RBI will conduct repo operations of 90 days tenor at the fixed repo rate. The facility will be on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday. The Scheme will be in operation till 11th of May or up to utilization of allocated amount whichever is earlier.

“Heightened volatility in capital markets in reaction to COVID-19 has imposed liquidity strains on mutual funds (MFs), which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects there from,” the RBI said in a press statement today.

4)Largest-ever hole in the ozone layer above Arctic finally closes:-The largest hole ever observed in the ozone layer over the Arctic has closed, says Copernicus’ Atmospheric Monitoring Service.

Copernicus is the Earth Observing satellite of EU.

However, scientists say that the earth has been able to heal the ozone layer hole due to the polar vortex, the high-altitude currents that normally bring cold air to the polar regions.

Also it has nothing to do with Covid-19 lockdown.

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