The correct answer is Fiscal deficit. Explanation & Key Takeaways: • Fiscal Deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure. • A recurring high fiscal deficit means that the government has been spending beyond its means. • The government meets the fiscal deficit by borrowing money. In a way, the total borrowing requirements of the government in a financial year are equal to the fiscal deficit in that year. • A fiscal deficit situation occurs when the government’s expenditure exceeds its income. • This difference is calculated both in absolute terms and also as a percentage of the Gross Domestic Product (GDP) of the country. • Fiscal Deficit formula: • Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts) Related Concepts: • Constitutes the government’s total income or receipts: • Revenue receipts of the government: • Corporation Tax. • Income Tax. • Custom Duties. • Union Excise Duties. • GST and taxes of Union territories. • Non-tax revenues: • Interest Receipts. • Dividends and Profits. • External Grants. • Other non-tax revenues. • Receipts of union territories. • Expenditures of the government: • Revenue Expenditure. • Capital Expenditure. • Interest Payments. • Grants-in-aid for creation of capital assets.