CA Foundation · Business Economics · Public Finance
A government has total expenditure of Rs 90,000 crore, non-debt receipts (revenue receipts plus non-debt capital receipts) of Rs 70,000 crore, and interest payments of Rs 12,000 crore. What is its primary deficit?
The primary deficit is Rs 8,000 crore. The fiscal deficit is expenditure minus non-debt receipts, which is Rs 20,000 crore, and subtracting interest payments of Rs 12,000 crore gives the primary deficit. It shows borrowing needed apart from servicing past debt.
- ARs 20,000 crore
- BRs 8,000 croreCorrect
- CRs 32,000 crore
- DRs 12,000 crore
Explanation
Fiscal deficit = 90,000 - 70,000 = Rs 20,000 crore. Primary deficit = fiscal deficit - interest payments = 20,000 - 12,000 = Rs 8,000 crore. Rs 20,000 crore is the fiscal deficit, which ignores the interest adjustment.
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