Assertion (A) : Fiscal deficit is greater than budgetary deficit. Reason (R) : Fiscal deficit is the borrowings from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.

Assertion is true because fiscal deficit measures the government’s total borrowing requirement, while budgetary (or budget) deficit historically referred to borrowings from the Reserve Bank of India. Textbooks state: Fiscal Deficit = Budget Deficit (i.e., borrowing from RBI) + market borrowings and other liabilities, so fiscal deficit covers RBI borrowing plus additional market/other liabilities [1]. Official definitions likewise record fiscal deficit as total borrowing from all sources, not just RBI, while the budgetary deficit concept reflected borrowings from RBI alone [3]. Therefore the Reason correctly describes fiscal deficit’s composition and logically explains why fiscal deficit is generally greater than the budgetary deficit.

Sources

1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > N. Fiscal Deficit > p. 110
2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2. I. Budget Deficit (or Government Deficit) > p. 109
3. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.5 Government Deficits > p. 153