Deficits represent fiscal imbalances in government finances. Revenue deficit: When revenue expenditure exceeds revenue receipt (unsustainable, requires borrowing for current spending). Fiscal deficit: When total expenditure exceeds revenue receipt (measures government borrowing need, includes all spending). Primary deficit: Fiscal deficit minus interest payments (shows borrowing for non-interest spending; important sustainability measure). Current account deficit (in national accounts context): When consumption + investment exceed GDP (requires external borrowing). Budget deficit implications: Requires borrowing, increases debt, raises interest rates, may crowd out private investment, creates future interest payment obligations. Deficit as percentage of GDP: Sustainability measure; international limits often set (e.g., 3% in EU). Structural vs. cyclical: Structural deficit persists even at full employment (policy-driven); Cyclical deficit arises during recession (temporary). Consequences: Inflation (if financed by printing money), External deficit (if financed internationally), Debt spiral (if interest rates rise faster than growth). Indian context: Fiscal deficit target of 3.5% as recent policy (balancing growth with sustainability). ICAI focus: Distinguishing deficit types, understanding implications. Exam tip: Revenue deficit is worst (borrowing for consumption); fiscal deficit includes investment (better); primary deficit focuses on policy discretion (excludes interest).