Primary Deficit can be zero if?

Fiscal Deficit = Interest Payments.

The correct answer is Option (1) → Fiscal Deficit = Interest Payments.

Primary Deficit=Fiscal Deficit−Interest Payments

So, if Primary Deficit is zero, then: Fiscal Deficit=Interest Payments

This means the government’s entire borrowing (fiscal deficit) is just enough to meet its interest obligations, and no borrowing is being done for any new expenditure other than interest payments.