Question
Which of the following is the correct formula for
calculating gross primary deficit?Solution
The gross primary deficit is the fiscal deficit excluding interest payments. It indicates the government’s borrowing requirements apart from paying interest on past borrowings. Key Points: 1. Gross fiscal deficit = Total expenditure – Total revenue (excluding borrowings). 2. Net interest liabilities represent interest payments on debt. 3. Primary deficit reflects the core fiscal stance without debt obligations. 4. It is a key metric for evaluating fiscal sustainability. 5. A higher primary deficit implies higher borrowing needs. Bee Facts: • (a): Not a valid calculation formula. • (b): RBI borrowing is not included in this formula. • (c): Incorrect as net interest liabilities are not added. • (d): Correct formula for gross primary deficit.
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