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Q54 (CDS-II/2023) Economy › Government Finance & Budget › Fiscal deficit concepts Answer Verified

Which one of the following expenditures is subtracted from Fiscal Deficit to arrive at Primary Deficit?

Result
Your answer: —  Â·  Correct: C
Explanation

The primary deficit is a key fiscal indicator used to assess the government's current fiscal health by focusing on present imbalances rather than past obligations. It is calculated by subtracting interest payments from the fiscal deficit [2]. While the fiscal deficit represents the total borrowing requirement of the government, it includes the burden of servicing accumulated debt from previous years [1]. By removing interest liabilities, the primary deficit reveals the extent to which current government expenditures (excluding debt service) exceed current revenues [1]. Other expenditures mentioned, such as defence, subsidies, and pensions, are components of the government's revenue or capital expenditure and are already included within the broader fiscal deficit calculation; they are not subtracted to arrive at the primary deficit [4]. Therefore, interest payments are the specific component deducted to isolate the current year's fiscal discipline [2].

Sources

  1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad > p. 72
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.5 Government Deficits > p. 153
  3. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.5 Government Deficits > p. 152
  4. [4] https://www.imf.org/external/pubs/ft/pam/pam48/pam4801.htm
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