A country’s fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country’s interest liabilities are ₹1,500 crores. What is the gross primary deficit?
Detailed Explanation:
Correct Answer: ✅ Option 1 (₹48,500 crores)
This question is based on the concept of Primary Deficit, which measures the fiscal deficit excluding interest payments on past borrowings.
✅ Statement I is Correct: Fiscal Deficit = ₹50,000 crore (given)
✅ Interest Liabilities = ₹1,500 crore (given)
✅ Formula:
Primary Deficit = Fiscal Deficit − Interest Payments
Calculation:
= ₹50,000 crore − ₹1,500 crore
= ₹48,500 crore
Note: The ₹10,000 crore non-debt creating capital receipts are already accounted for while calculating the fiscal deficit. Therefore, they are not used again in the calculation of primary deficit.
Short Notes: Fiscal Deficit and Primary Deficit
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Fiscal Deficit represents the government's total borrowing requirement.
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Fiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings).
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Primary Deficit = Fiscal Deficit − Interest Payments.
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Primary Deficit indicates the current year's fiscal imbalance excluding past debt burden.
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A lower primary deficit suggests better fiscal discipline.
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If Primary Deficit is zero, borrowings are only sufficient to pay interest on previous loans.
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Non-debt capital receipts include disinvestment proceeds and loan recoveries.
Question 2 of 10 Fiscal Deficit, Revenue Deficit and Public Debt
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