CA Foundation · Business Economics · Public Finance
A government has total expenditure of Rs 50,000 crore. Its total receipts excluding borrowings are Rs 38,000 crore. Interest payments are Rs 7,000 crore. What are the fiscal deficit and the primary deficit respectively?
Fiscal deficit is Rs 12,000 crore (expenditure Rs 50,000 crore less non-borrowing receipts Rs 38,000 crore). Primary deficit is fiscal deficit minus interest payments of Rs 7,000 crore, which gives Rs 5,000 crore.
- ARs 12,000 crore and Rs 5,000 croreCorrect
- BRs 12,000 crore and Rs 19,000 crore
- CRs 5,000 crore and Rs 12,000 crore
- DRs 19,000 crore and Rs 12,000 crore
Explanation
Fiscal deficit = total expenditure - receipts excluding borrowings = 50,000 - 38,000 = Rs 12,000 crore. Primary deficit = fiscal deficit - interest payments = 12,000 - 7,000 = Rs 5,000 crore. Adding interest instead of subtracting gives Rs 19,000 crore, which is the wrong sign.
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