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CSEET · Economic and Business Environment · Indian Union Budget

A primary deficit of zero in a given year means that:

A zero primary deficit means the fiscal deficit equals interest payments, so the government borrows only to service interest on earlier debt. Non-interest expenditure is fully met from its receipts, but borrowing is still positive unless interest is also zero.

  1. AThe government has no borrowing at all
  2. BBorrowing equals the interest payments for the yearCorrect
  3. CRevenue receipts equal revenue expenditure
  4. DCapital expenditure is nil

Explanation

Primary deficit = fiscal deficit − interest payments. If it is zero, fiscal deficit equals interest payments, so borrowing is needed only to pay interest. It does not mean zero borrowing, which would need a zero fiscal deficit.

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