The deficit after adjusting the revenue account for state grants that have been used for the creation of Capital Assets is called as Effective Revenue Deficit.

Effective Revenue deficit is a new term introduced in the Union Budget 2011-12. While revenue deficit is the difference between revenue receipts and revenue expenditure, the present accounting system includes all grants from the Union Government to the state governments/Union territories/other bodies as revenue expenditure, even if they are used to create assets.