CA Foundation · Business Economics · Public Finance
A government has total expenditure of Rs 40,000 crore, revenue receipts of Rs 28,000 crore, and non-debt capital receipts of Rs 4,000 crore. Interest payments are Rs 6,000 crore. What is its primary deficit?
Primary deficit is fiscal deficit minus interest payments. Fiscal deficit is 40,000 less 32,000, or Rs 8,000 crore. Subtracting interest of Rs 6,000 crore gives a primary deficit of Rs 2,000 crore, showing borrowing needed apart from interest obligations.
- ARs 2,000 croreCorrect
- BRs 6,000 crore
- CRs 8,000 crore
- DRs 14,000 crore
Explanation
Fiscal deficit = total expenditure - (revenue receipts + non-debt capital receipts) = 40,000 - 32,000 = Rs 8,000 crore. Primary deficit = fiscal deficit - interest payments = 8,000 - 6,000 = Rs 2,000 crore. Rs 8,000 crore is the fiscal deficit itself, and Rs 14,000 crore adds interest instead of subtracting it.
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