Fiscal deficit shows the borrowing requirements of the government during the budget year. It indicates how government is living beyond its means. It has been creating a large burden of interest payment and repayment of loans in the future. A large fiscal deficit may be inflationary. Government takes more loans to repay the earlier loans. It affects the poor in the country because with their limited incomes, (which further get reduced, because of the rising prices) they get less amount of pr.oducts i.e. their real income falls. This aggravates their problems of life.

Capital budget deficit refers to the situation in which capital expenditure exceed capital receipts.To reduce this gulf,government may resort to disinvestment (i.e. reduction in assets).

It is a capital expenditure, as it creates assets for the Central Government in the form a source of regular income. However,grants  given to the State Government is a revenue expenditure as it neither reduces liabilities nor creates assets.

Surplus budget refers to a situation in which government's expenditure are less than government's revenues.This is a good policy to reduce the liquidity and hence demand and inflation, however, surplus budget cannot be presented in developing countries like due to low level of development.

Primary Deficit
                       Fiscal Deficit = Borrowings
                       Thus,fiscal deficit=Rs 9000

Fiscal Deficit  = Primary Deficit + Interest Payment =6500+400=Rs 6900 crore

The government budget can be used to bring in economic stability. Economic stability refers to the minimization of fluctuations in prices (i.e., control of inflationary and deflationary trends) in the economy. Appropriate taxation, subsidies and public expenditure policies may be used for this purpose. When there is inflation, government can reduce its own expenditure and may impose new taxes and raise the rate of existing taxes, thus reducing aggregate demand and inflationary pressure thereby. When there is deflation, the government can increase its own expenditure. It can also reduce taxes and give subsidies to encourage spending by the people, thus increasing aggregate demand and reducing deflationary pressure thereby.