• Revenue deficit (RD) = Total Revenue Expenditure – Total Revenue Receipts
      In this Revenue expenditure there are many expenses which go towards building of capital assets.. such as grant in aid given to state government which in turn invests in building of assets..
      Thus in Effective Revenue Deficit(ERD) we include only those expenditure that do not go in making of any such capital assets..
      ERD = Non capital asset creating Revenue Expenditure – Total Revenue Receipts
      Thus ERD is always less then RD..

      • Aditya Sharma

        Sorry people.. I got it wrong…
        Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets.

  1. Akshit Gupta

    Hi SimplyDecoded,,
    Can you plz update this article. Lot of things have changed since then including setting up of FRBM Committee and their recommendations.

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