The budget of a government shows the following (Rs crore):
| Item | Amount |
|---|---|
| Tax revenue | 600 |
| Non-tax revenue | 150 |
| of which: interest receipts | 40 |
| Revenue expenditure | 1,000 |
| of which: interest payments | 220 |
| Capital expenditure | 350 |
| Recovery of loans | 30 |
| Proceeds from disinvestment | 20 |
| Borrowings | 550 |
The gross primary deficit is measured as the gross fiscal deficit minus net interest liabilities. What are the gross fiscal deficit and the gross primary deficit?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs 550 crore; Rs 370 crore
Gross fiscal deficit is total expenditure minus all receipts other than borrowing. Gross primary deficit subtracts net interest liabilities: interest payments minus interest receipts.
Given:
Revenue receipts = 600 + 150 = 750
Total expenditure = 1,000 + 350 = 1,350
Non-debt creating capital receipts = 30 + 20 = 50
Interest payments = 220
Interest receipts = 40 (Rs crore)
\( \displaystyle GFD = 1{,}350 - (750 + 50) = 550 \)
\( \displaystyle \text{Net interest liabilities} = 220 - 40 = 180 \)
\( \displaystyle GPD = 550 - 180 = 370 \)
The deficits are Rs 550 crore and Rs 370 crore. Borrowings of Rs 550 crore are not deducted; they finance the deficit.
Option (1) Rs 550 crore; Rs 330 crore — Rs 330 crore subtracts the whole interest payment of 220 and forgets the interest receipts.
NCERT (2026-27): “5.2.1 Measures of Government Deficit … Fiscal Deficit: Fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding borrowing” “Non-debt creating capital receipts are those receipts which are not borrowings and, therefore, do not give rise to debt. Examples are recovery of loans and the proceeds from the sale of PSUs. …” “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.” |