Question : The primary deficit is calculated as ____________ minus interest payments.
Option 1: Revenue deficit
Option 2: Fiscal deficit
Option 3: Capital receipts
Option 4: Revenue receipts
Correct Answer: Fiscal deficit
Solution : The correct answer is (B) Fiscal deficit minus interest payments.
The primary deficit represents the difference between the government's fiscal deficit and its interest payments. It measures the extent to which the government's total expenditure, excluding interest payments, exceeds its revenue receipts.
The fiscal deficit is the difference between the government's total expenditure and its total revenue, including both revenue receipts and capital receipts. It reflects the overall shortfall in the government's financing and indicates the extent to which the government needs to borrow to fund its expenses.
Interest payments, on the other hand, refer to the payments made by the government on its outstanding debts. These payments represent the cost of borrowing for the government.
By subtracting interest payments from the fiscal deficit, the primary deficit provides a measure of the government's borrowing requirement, excluding the impact of interest payments.