Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings of ₹10,000 crores and interest payments of ₹6,000 crores.
Which of the following statements are correct?
I. Revenue deficit is ₹20,000 crores.
II. Fiscal deficit is ₹10,000 crores.
III. Primary deficit is ₹4,000 crores.
Select the correct answer using the code given below.
Detailed Explanation:
Correct Answer: ✅ Option 4 (I, II and III)
This question is based on the formulas of Revenue Deficit, Fiscal Deficit, and Primary Deficit used in government budgeting.
✅ Statement I is Correct: Revenue Deficit = Revenue Expenditure − Revenue Receipts
= ₹80,000 crore − ₹60,000 crore
= ₹20,000 crore
✅ Statement II is Correct: Fiscal Deficit represents the government's total borrowing requirement.
Given Borrowings = ₹10,000 crore
Therefore, Fiscal Deficit = ₹10,000 crore
✅ Statement III is Correct: Primary Deficit = Fiscal Deficit − Interest Payments
= ₹10,000 crore − ₹6,000 crore
= ₹4,000 crore
Short Notes: Budget Deficits
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Revenue Deficit = Revenue Expenditure − Revenue Receipts
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Revenue deficit indicates that the government is unable to meet its day-to-day expenses from its regular income.
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Fiscal Deficit = Total Borrowings of the Government
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Fiscal deficit reflects the total gap between expenditure and receipts (excluding borrowings).
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Primary Deficit = Fiscal Deficit − Interest Payments
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Primary deficit shows the current year's fiscal imbalance excluding past debt obligations.
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A zero primary deficit means borrowings are only being used to pay interest on past loans.
Question 3 of 10 Fiscal Deficit, Revenue Deficit and Public Debt
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