Arrange the following steps in the correct order to work out the primary deficit from a budget:
(A) Subtract revenue receipts from revenue expenditure to get the revenue deficit
(B) Add capital expenditure to the revenue deficit
(C) Subtract non-debt creating capital receipts from that total to get the fiscal deficit
(D) Subtract interest payments from the fiscal deficit
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B), (C), (D)
Each deficit is built on the one before it.
(A) Revenue expenditure − revenue receipts gives the revenue deficit. This comes first.
(B) Capital expenditure is then added to the revenue deficit.
(C) Non-debt creating capital receipts are taken away, which gives the fiscal deficit (revenue deficit + capital expenditure − non-debt creating capital receipts).
(D) Interest payments are taken from the fiscal deficit, which gives the primary deficit.
NCERT (2026-27): “5.2.1 Measures of Government Deficit … Revenue Deficit: The revenue deficit refers to the excess of government’s revenue expenditure over revenue receipts” “… 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). …” “… 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” |