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    Question

    Which of the following is the correct formula for

    calculating gross primary deficit?
    A Gross fiscal deficit – Borrowings from abroad Correct Answer Incorrect Answer
    B Gross fiscal deficit – Borrowing from RBI Correct Answer Incorrect Answer
    C Gross fiscal deficit + Net interest liabilities Correct Answer Incorrect Answer
    D Gross fiscal deficit – Net interest liabilities Correct Answer Incorrect Answer

    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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