A country's fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt

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Question

A country's fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹1,500 crores. What is the gross primary deficit?

Accepted Answer

Correct Answer: A — ₹48,500 croresStep-by-step Solution:Given data: Fiscal Deficit = ₹50,000 crores; Non-debt creating capital receipts = ₹10,000 crores; Interest liabilities = ₹1,500 crores.Key Definitions:Fiscal Deficit: Total Expenditure − Total Receipts (excluding borrowings) = Total Borrowings (net). It is the borrowing requirement of the government.Primary Deficit: = Fiscal Deficit − Interest Payments. This shows the current borrowing requirement excluding the interest burden of past debt.In this question, the question asks for Gross Primary Deficit.Gross Primary Deficit: = Gross Fiscal Deficit − Interest Payments= ₹50,000 − ₹1,500 = ₹48,500 croresNote: The non-debt creating capital receipts (₹10,000 crores — e.g., disinvestment proceeds) are used to calculate the net fiscal deficit, but the question gives the fiscal deficit as ₹50,000 crores (which is presumably the gross fiscal deficit). The primary deficit is simply: Fiscal Deficit − Interest Payments = 50,000 − 1,500 = 48,500.Why other options are incorrect:Option B (₹51,500 crores): This would result if interest payments were ADDED to fiscal deficit (50,000 + 1,500) — incorrect. Primary deficit always SUBTRACTS interest payments. ✗Option C (₹58,500 crores): This would result if 50,000 + 10,000 − 1,500 = 58,500 — incorrectly combining non-debt receipts. ✗Option D (None of the above): Incorrect. The calculation gives ₹48,500 crores which is Option A. ✗Key Concept: Deficit Types (Summary): Revenue Deficit = Revenue Expenditure − Revenue Receipts (shows current account deficit). Fiscal Deficit = Total Expenditure − Revenue Receipts − Non-Debt Capital Receipts = Net Borrowings (shows total borrowing need). Gross Fiscal Deficit: Uses gross (total) figures without netting. Primary Deficit = Fiscal Deficit − Interest Payments (shows borrowing need excluding debt servicing). Effective Revenue Deficit = Revenue Deficit − Grants for creation of Capital Assets (introduced by India in 2011-12 Budget). FRBM Targets for India: Fiscal Deficit: 3% of GDP (medium-term target); Revenue Deficit: 0% (eliminate); Primary Deficit: 0% or surplus. India's fiscal deficit for 2024-25 (Budget estimate): 4.9% of GDP, aiming to reduce to 4.5% by 2025-26. NK Singh committee (2017) reviewed FRBM Act and recommended a Fiscal Council for independent monitoring.

A country's fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹1,500 crores. What is the gross primary deficit?

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A country's fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹1,500 crores. What is the gross primary deficit?

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