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In a year, a government has a fiscal deficit of ₹16 lakh crore, interest payments of ₹10 lakh crore and a revenue deficit of ₹7 lakh crore. What is the amount of borrowing used for creating capital assets (fiscal deficit less revenue deficit), and the primary deficit?
Borrowing left for capital assets is ₹9 lakh crore, being fiscal deficit of ₹16 lakh crore less revenue deficit of ₹7 lakh crore. Primary deficit is ₹6 lakh crore, being fiscal deficit less interest payments of ₹10 lakh crore.
- ACapital use ₹9 lakh crore; primary deficit ₹6 lakh croreCorrect
- BCapital use ₹9 lakh crore; primary deficit ₹26 lakh crore
- CCapital use ₹23 lakh crore; primary deficit ₹6 lakh crore
- DCapital use ₹6 lakh crore; primary deficit ₹9 lakh crore
Explanation
Borrowing finances the revenue deficit first, so the part available for capital formation is 16 − 7 = ₹9 lakh crore. Primary deficit = 16 − 10 = ₹6 lakh crore. Adding interest gives the wrong ₹26 lakh crore, and adding the deficits gives the wrong ₹23 lakh crore.
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