Which of the following expression is correct?

Question

Question

This question was previously asked in

SSC CPO 2022 Tier-I Official Paper (Held On 11 Nov 2022 Shift 3) [Answer Key]

Answer 1

The correct answer is Gross primary deficit = Gross fiscal deficit – Net interest liabilities.

Key Points

Gross Primary Deficit is the Gross Fiscal Deficit less interest payments.
Net Primary Deficit is Net Fiscal Deficit minus net interest payments.
Fiscal deficit indicates total government borrowing requirements including interest whereas primary deficit indicates total government borrowing requirements excluding interest payments.

Additional Information

The deficit is the amount by which the spending done in a budget surpasses the earnings.
There are three types of deficit:

Revenue deficit:
- A revenue deficit refers to the surplus of the government’s revenue expenditure over the revenue receipts.
- It reflects the inefficiency of the government to reach its regular or recurring expenditure.
- The government may raise its revenue receipts by raising income tax.
- Revenue deficit = Revenue expenditure – Revenue receipts
Fiscal deficit:
- A fiscal deficit is the excess of budget expenditure over budget receipts other than borrowings.
- It reflects the total government borrowings during a fiscal year.
- Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts)
- Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad
Primary deficit:
- The purpose of measuring the primary deficit is to draw attention to current fiscal imbalances
- The primary deficit is calculated in order to obtain an estimate of the amount of borrowing that will be required due to current expenditures exceeding revenues.
- Gross primary deficit = Gross fiscal deficit – Net interest liabilities