Government dissaving
Also called: Dissaving · Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Class 12, Ch 5 "Government Budget and the Economy"
Meaning
Government dissaving means the government spends more on current consumption than it earns from revenue. To cover the gap, it uses the savings of other sectors, such as households and firms. A revenue deficit shows this dissaving:
Revenue deficit = Revenue expenditure − Revenue receipts
It is harmful because the government borrows to pay for day-to-day spending, not to build assets. Debt and interest then pile up. Since committed spending can't be cut, the pressure often falls on capital spending or welfare.
Example
In 2023-24, the Centre's revenue expenditure was 11.8% of GDP and its revenue receipts were 9.2%. The revenue deficit of 2.6% of GDP shows the size of government dissaving.
Don't confuse with
- Fiscal deficit: this is the total borrowing requirement, and it includes borrowing for capital spending. Dissaving is only the part that pays for consumption.
Related concepts
- Balanced budget
- Surplus budget
- Budget deficit
- Revenue deficit
- Effective revenue deficit
- Fiscal deficit
- Primary deficit
- Net interest liabilities
- Quality of government expenditure