Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Large share of revenue deficit in fiscal deficit – much of the borrowing is used for consumption
When the revenue deficit forms a large share of the fiscal deficit, much of the borrowing pays for consumption needs rather than investment.
Option (1) Primary deficit – total borrowing requirement of the government from all sources — Incorrect. The fiscal deficit shows the total borrowing requirement.
Option (2) Fiscal deficit – borrowing on account of current expenditures exceeding revenues, net of interest — Incorrect. This describes the primary deficit, which leaves out interest.
Option (3) Revenue deficit – excess of revenue receipts over revenue expenditure — Incorrect. The order is reversed. Revenue deficit is the excess of revenue expenditure over revenue receipts.
Option (4) Large share of revenue deficit in fiscal deficit – much of the borrowing is used for consumption — Correct. Revenue expenditure is spending on consumption needs.
NCERT (2026-27): “5.2.1 Measures of Government Deficit … From the way gross fiscal deficit is measured as given above, it can be seen that revenue deficit is a part of fiscal deficit (Fiscal Deficit = Revenue Deficit + Capital Expenditure - non-debt creating capital receipts). A large share of revenue deficit in fiscal deficit indicated that a large part of borrowing is being used to meet its consumption expenditure needs rather than investment.” “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 …” |