Gross Primary Deficit is equal to the difference between Gross Fiscal Deficit and:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Net Interest Liabilities
When the government spends more than it receives, it borrows, and the gross fiscal deficit measures this total borrowing. Part of that borrowing, though, only pays interest on loans taken in the past. Take the interest burden out, and what is left is the borrowing for the present year’s own spending, the primary deficit.
The interest burden is measured as net interest liabilities, that is, interest payments minus the interest receipts of the government on its net domestic lending:
Gross primary deficit = Gross fiscal deficit − Net interest liabilities
Why the other options are incorrect
Option (1) Net Borrowings — Incorrect. Borrowing is how the fiscal deficit is financed: gross fiscal deficit = net borrowing at home + borrowing from RBI + borrowing from abroad. Deducting it would leave nothing.
Option (2) Revenue Receipts — Incorrect. Revenue receipts enter the revenue deficit (revenue expenditure minus revenue receipts) and are already counted inside the fiscal deficit; they are not deducted from it.
Option (3) Capital Receipts — Incorrect. The non-debt capital receipts (recovery of loans and disinvestment) are already taken away in working out the fiscal deficit, and the rest of the capital receipts is the borrowing itself. Neither is what separates the primary deficit from the fiscal deficit.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 15-05 S1 | 14-05 S1* | – | – | – |
* A similar question.
NCERT (2025-26): “Primary Deficit: We must note that the borrowing requirement of the government includes interest obligations on accumulated debt. The goal of measuring primary deficit is to focus on present fiscal imbalances. To obtain an estimate of borrowing on account of current expenditures exceeding revenues, we need to calculate what has been called the primary deficit. It is simply the fiscal deficit minus the interest payments Gross primary deficit = Gross fiscal deficit – Net interest liabilities Net interest liabilities consist of interest payments minus interest receipts by the government on net domestic lending.…” |