Primary Deficit is equal to:
Options
AFiscal Deficit - Interest Payments
BRevenue Deficit - Interest Payments
CFiscal Deficit + Interest Payments
DTotal Expenditure - Total Receipts
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Public FinancePYQ - Dec 2021 (Inter)Question 128 of 20
All Questions Correct Answer
✅ Option a — Fiscal Deficit - Interest Payments
All Options:
- AFiscal Deficit - Interest Payments
- BRevenue Deficit - Interest Payments
- CFiscal Deficit + Interest Payments
- DTotal Expenditure - Total Receipts
Detailed Solution & Explanation
To understand the concept of Primary Deficit, we need to break it down step by step:
• The Primary Deficit is a measure of the government's fiscal deficit, excluding interest payments on its debt.
• It is calculated by subtracting the interest payments from the fiscal deficit, which represents the total borrowing requirement of the government.
• The fiscal deficit is the difference between the government's total expenditure and its total receipts, excluding borrowings.
• By subtracting interest payments from the fiscal deficit, we get the primary deficit, which shows the extent to which the government's current expenditures, excluding interest payments, exceed its current revenues.
The correct answer is right because it accurately reflects the definition of primary deficit, which is a key concept in public finance and fiscal policy.
Options like Revenue Deficit - Interest Payments are incorrect because revenue deficit is a different concept, which is the difference between revenue expenditure and revenue receipts.
Total Expenditure - Total Receipts is also incorrect because it represents the overall fiscal deficit, not the primary deficit.
About This Chapter: Public Finance
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Fiscal Policy, Budget, Market Failure
This chapter deals with government finances — how the government earns (taxation) and spends (expenditure) money. Key topics include Fiscal Policy, types of taxes (Direct and Indirect), the Union Budget, Public Debt, and the concept of Market Failure and how government intervention corrects it.
View Official ICAI SyllabusExam Strategy Tip
Focus on the difference between Revenue and Capital items in the budget. Understand Fiscal Deficit and its implications. Tax-related MCQs are commonly asked.
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