Question

Which of following statement is true about the Primary deficit?

• A. It is difference between Revenue Receipts and Revenue Expenditure
• B. It is difference between Capital Receipts and Interest Payment
• C. It is difference between the Fiscal Deficit and Interest Payment
• D. It is addition of Fiscal Deficit and Interest Payment

Answer 1

The Correct Option is C

The concept of the Primary Deficit is important in understanding a country's fiscal situation. To determine which statement about the Primary Deficit is true, let's break down the available options and identify the correct description:

Option 1: It is the difference between Revenue Receipts and Revenue Expenditure.
This statement refers to Revenue Deficit, not Primary Deficit.

Option 2: It is the difference between Capital Receipts and Interest Payment.
This does not correspond to any known deficit measure related to the primary deficit.

Option 3: It is the difference between the Fiscal Deficit and Interest Payment.
This is the correct statement. The Primary Deficit is defined as:

Primary Deficit = Fiscal Deficit − Interest Payments

This formula illustrates the gap between the government's total expenditure and receipts, excluding interest payments. It highlights the deficit created by the government's non-interest expenditures, providing insight into fiscal health excluding the cost of past borrowings.

Option 4: It is addition of Fiscal Deficit and Interest Payment.
This description is incorrect for Primary Deficit as it describes a theoretical measure not typically used in fiscal analysis.

Therefore, the true statement about the Primary Deficit is the difference between the Fiscal Deficit and Interest Payment.