Consider the following statements about the primary deficit:
(A) The primary deficit is the fiscal deficit minus the interest payments.
(B) Gross primary deficit = Gross fiscal deficit − Net interest liabilities.
(C) Net interest liabilities consist of interest payments plus interest receipts by the government on net domestic lending.
(D) The goal of measuring the primary deficit is to focus on present fiscal imbalances.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (D) only
The primary deficit removes interest from the fiscal deficit, to show the borrowing needed for present spending alone.
(A) The primary deficit is the fiscal deficit minus the interest payments. — Correct. This is its meaning.
(B) Gross primary deficit = Gross fiscal deficit − Net interest liabilities. — Correct. This is the formula.
(C) Net interest liabilities consist of interest payments plus interest receipts by the government on net domestic lending. — Incorrect. They are interest payments minus interest receipts.
(D) The goal of measuring the primary deficit is to focus on present fiscal imbalances. — Correct. Interest is the cost of past borrowing, so it is left out.
NCERT (2026-27): “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.” |