Official UPSC Format

Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government 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.
Select the correct answer using the code given below.

1. I. Revenue deficit is ₹20,000 crores.

2. II. Fiscal deficit is ₹10,000 crores.

3. III. Primary deficit is ₹4,000 crores.

⚡ Quick Recall Snippet

Macroeconomic deficits reflect government financial health. Revenue Deficit is the gap between revenue expenditure and receipts. Fiscal Deficit equates to total borrowings, and Primary Deficit subtracts interest payments from the fiscal deficit.

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Detailed Solution & Authority Citations

Correct Answer is Option D
Based on the standard macroeconomic frameworks established by the Union Budget Documents (FRBM Act), we can mathematically verify each statement.
  • I. Revenue Deficit (Correct): This indicates the shortfall of current receipts over current expenses.

    • Formula: Revenue Expenditure − Revenue Receipts
     Calculation: ₹80,000 crores − ₹60,000 crores = ₹20,000 crores.
  • II. Fiscal Deficit (Correct): By definition, the Fiscal Deficit represents the total borrowing requirements of the government to bridge the gap between total expenditure and non-debt creating receipts.

    • Given Data: Total borrowings = ₹10,000 crores. Therefore, Fiscal Deficit = ₹10,000 crores.
  • III. Primary Deficit (Correct): This metric isolates the current fiscal effort by removing the burden of past debt (interest).

    •  Formula: Fiscal Deficit − Interest Payments
    Calculation:* ₹10,000 crores − ₹6,000 crores = ₹4,000 crores.
    Since all calculations align perfectly with the statutory formulas, all three statements are correct.

    🚨 The Examiner's Trap

    Candidates weak in macroeconomics might confuse Fiscal Deficit with Revenue Deficit or fail to recognize that 'total borrowings' is the exact definitional equivalent of Fiscal Deficit in budget math, leading them to eliminate correct statements.

    Active Recall Flashcard

    Tap to Flip

    What is the formula for calculating Primary Deficit?

    Primary Deficit = Fiscal Deficit - Interest Payments.

    Concept Flow Mapping

    Fiscal Deficit
    Equals
    Total Borrowings
    Primary Deficit
    Equals
    Fiscal Deficit Minus Interest
    Revenue Deficit
    Equals
    Revenue Expenditure Minus Revenue Receipts

    Logic Quest

    "Why do economists calculate the 'Primary Deficit'?"

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