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The correct answer is option-4, effective revenue deficit.
When we deduct grants for the creation of capital assets from the revenue deficit, the result is the effective revenue deficit.
To understand this concept, let`s briefly look at the definitions of the other three options:
1) Primary deficit: It is the fiscal deficit minus interest payments on previous borrowing. It indicates the borrowing needs of the government for current expenses.
2) Net fiscal deficit: It is the difference between total expenditure and total income of the government. It includes both revenue deficit and capital expenditure.
3) Budgetary deficit: It is the difference between the government`s total expenditure and its total receipts (excluding borrowing). It is often used as an indicator of the government`s fiscal discipline.
Now, coming back to the effective revenue deficit, it is a measure that takes into account grants for the creation of capital assets while calculating the revenue deficit. It provides a clearer picture of the government`s borrowing needs for revenue expenditure after adjusting for grants for capital formation.
In summary, the effective revenue deficit is obtained by deducting grants for capital assets from the revenue deficit and gives a better understanding of the government`s borrowing needs for revenue expenditure.