What are the implications of Revenue Deficit?

Implications. It gives information on what the government is borrowing for, i.e., for financing its current expenditure or for capital formation. Main implications of deficit are:
(i)    Reduction of assets. Revenue deficit indicates dissavings on government account because government has to make up the uncovered gap by drawing upon capital receipts through sale of its assets (disinvestment). Thus it results in reduction of assets.
(ii)    Inflationary situation. Since borrowed funds from capital account are used to meet generally consumption expenditure of the government, it leads to inflationary situation in the economy with all its ills.
(iii)    More revenue deficit. Large borrowing to meet revenue deficit will increase debt burden due to repayment liability and interest payment. This may lead to larger and larger revenue deficit in future.