Q. Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts are ₹60,000 crores. The Government budget also shows borrowings of ₹10,000 crores and interest payments of ₹6,000 crores. Which of the following statements are correct?
I. Revenue deficit is ₹20,000 crores.
II. Fiscal deficit is ₹10,000 crores.
III. Primary deficit is ₹4,000 crores.
Definition:
Revenue Deficit = Revenue Expenditure – Revenue Receipts
Calculation:
Revenue Expenditure = ₹80,000 crores
Revenue Receipts = ₹60,000 crores
So,
Revenue Deficit = ₹80,000 – ₹60,000 = ₹20,000 crores
Statement II is correct: Fiscal Deficit
Definition:
Fiscal Deficit = Total Expenditure – Total Receipts (excluding borrowings)
In this question, total borrowings by the government are ₹10,000 crores, which means the gap between the government’s total expenditure and its non-borrowed receipts is being met by borrowing ₹10,000 crores.
Fiscal Deficit is the total borrowing requirement of the government. In the given scenario, the borrowings directly represent the fiscal deficit.
Fiscal Deficit = Borrowings = 10,000 crores
Statement III is correct: Primary Deficit
Definition:
Primary Deficit = Fiscal Deficit – Interest Payments
Calculation:
Fiscal Deficit = ₹10,000 crores
Interest Payments = ₹6,000 crores
Primary Deficit = ₹10,000 – ₹6,000 = ₹4,000 crores
Hence, All three statements are correct.
