Answer :

Budget deficit means when the amount by which government expenditure exceeds the tax revenue earned by government and trade deficit means when the amount of import expenditure exceeds the export revenue earned by the economy.

Budget deficit = G - T

Where,

G is government expenditure

T is government income that is tax revenue

Trade deficit = M - T or (I - S) + (G - T)

Where,

M is import expenditure

T is export revenue

I is Investment X Inflow into the country

S is saving

It is given that,

I - S = Rs.2000 crores.

G - T = (-) Rs.1500 crores.

Therefore,

Trade deficit = [I - S] + [G - T]

= 2000 + [-1500]

= Rs.500 crores.

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