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Q65 (IAS/2025) Economy › Government Finance & Budget › Fiscal deficit concepts Answer Verified

A country's fiscal deficit stands at ₹ 50,000 crores. It is receiving ₹ 10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹ 1,500 crores. What is the gross primary deficit?

Result
Your answer: —  ·  Correct: A
Explanation

Gross primary deficit is calculated as Gross fiscal deficit minus Net interest liabilities[1]. In this question, the fiscal deficit is given as ₹50,000 crores and interest liabilities are ₹1,500 crores.

The calculation is straightforward:
Gross Primary Deficit = Fiscal Deficit - Interest Liabilities
Gross Primary Deficit = ₹50,000 crores - ₹1,500 crores = ₹48,500 crores

The information about non-debt creating capital receipts (₹10,000 crores) is not needed for calculating the primary deficit. The primary deficit focuses on present fiscal imbalances by estimating borrowing on account of current expenditures exceeding revenues[1], excluding the burden of past interest obligations. Therefore, option A (₹48,500 crores) is the correct answer.

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
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. A country's fiscal deficit stands at ₹ 50,000 crores. It is receiving ₹ 10,000 crores through non-debt creating capital receipts. The cou…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10

This is a textbook 'Sitter' designed to reward those who read NCERT Macroeconomics. The question contains a classic distractor (₹10,000 cr non-debt receipts) which is already part of the Fiscal Deficit calculation and must be ignored. Strategy: Master the 4 core deficit formulas; don't just memorize definitions, practice the math.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
What is the gross primary deficit for a country whose fiscal deficit is ₹50,000 crores, non-debt creating capital receipts are ₹10,000 crores, and interest liabilities are ₹1,500 crores?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 6: Open Economy Macroeconomics > National Income Identity for an Open Economy > p. 102
Presence: 5/5
“Gross primary deficit The fiscal deficit minus interest payments. High powered money Money injected by the monetary authority in the economy. Consists mainly of currency. Households The families or individuals who supply factors of production to the firms and which buy the goods and services from the firms. Imports Purchase of goods and services by the domestic country to the rest of the world.”
Why this source?
  • Gives the direct formula: gross primary deficit = fiscal deficit − interest payments.
  • Applying that formula to the given numbers yields 50,000 − 1,500 = 48,500 crores, so the primary deficit can be computed.
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
Presence: 5/5
“Primary Deficit: We must note that the borrowing requirement of the government includes interest obligations on accumulated debt. The goal of measuring primary deficit is to focus on present fiscal imbalances. To obtain an estimate of borrowing on account of current expenditures exceeding revenues, we need to calculate what has been called the primary deficit. It is simply the fiscal deficit minus the interest payments Gross primary deficit = Gross fiscal deficit – Net interest liabilities Net interest liabilities consist of interest payments minus interest receipts by the government on net domestic lending.”
Why this source?
  • States gross primary deficit equals gross fiscal deficit minus net interest liabilities (interest payments minus interest receipts).
  • Confirms that subtracting interest obligations from the fiscal deficit is the correct adjustment to obtain primary deficit.
Pattern takeaway: UPSC is shifting from purely theoretical definitions to 'Applied Basics' in Economy. They want to check if you can actually use the concepts (like calculating a deficit or a multiplier) rather than just recognizing the definition.
How you should have studied
  1. [THE VERDICT]: Sitter. Direct application of a formula found in NCERT Class XII Macroeconomics (Chapter 5).
  2. [THE CONCEPTUAL TRIGGER]: Public Finance > Government Budgeting > Measures of Government Deficit.
  3. [THE HORIZONTAL EXPANSION]: Memorize the Deficit Hierarchy: 1. Revenue Deficit (Rev Exp - Rev Receipts) 2. Effective Revenue Deficit (Rev Deficit - Grants for Capital Assets) 3. Fiscal Deficit (Total Borrowing Requirement) 4. Primary Deficit (Fiscal Deficit - Interest Payments). Know the FRBM Act 2003 targets associated with these.
  4. [THE STRATEGIC METACOGNITION]: The examiner tested your confidence in the formula by providing superfluous data (Non-debt capital receipts). If your concept was shaky, you might have tried to subtract or add the 10,000. Always isolate the variables required by the formula and ignore the noise.
Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Primary deficit calculation
💡 The insight

Primary deficit is computed by subtracting interest payments from the fiscal deficit, which is exactly the operation required in the question.

High-yield for budget and public finance questions: enables quick numeric answers and links to assessments of current fiscal imbalance versus past debt servicing. It connects to topics on fiscal consolidation, deficit decomposition, and budget arithmetic.

📚 Reading List :
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 6: Open Economy Macroeconomics > National Income Identity for an Open Economy > p. 102
  • 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
🔗 Anchor: "What is the gross primary deficit for a country whose fiscal deficit is ₹50,000 ..."
📌 Adjacent topic to master
S1
👉 Net interest liabilities
💡 The insight

Net interest liabilities refine the subtraction for primary deficit as interest payments minus interest receipts, affecting the final primary-deficit figure when interest income exists.

Important for precision in fiscal calculations and for interpreting primary deficit figures in budgets where the government has interest receipts; useful in questions comparing gross vs. net fiscal measures.

📚 Reading List :
  • 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
🔗 Anchor: "What is the gross primary deficit for a country whose fiscal deficit is ₹50,000 ..."
📌 Adjacent topic to master
S1
👉 Fiscal deficit as the government's borrowing requirement
💡 The insight

Fiscal deficit represents the total borrowing need that is then adjusted (by interest) to get primary deficit.

Fundamental concept in public finance and macroeconomics questions; underpins understanding of how deficits are financed and links to capital receipts and market borrowings—common UPSC question themes.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.5 Government Deficits > p. 153
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > N. Fiscal Deficit > p. 110
🔗 Anchor: "What is the gross primary deficit for a country whose fiscal deficit is ₹50,000 ..."
🌑 The Hidden Trap

Effective Revenue Deficit (ERD). Since they asked a calculation on Primary Deficit, the next logical formula is ERD. Formula: Revenue Deficit minus Grants in Aid for creation of capital assets. This was introduced in the Union Budget 2011-12 to show that not all revenue expenditure is wasteful.

⚡ Elimination Cheat Code

Magnitude Logic: Primary Deficit is Fiscal Deficit MINUS Interest Payments. Therefore, Primary Deficit MUST be smaller than Fiscal Deficit (₹50,000). Options B (51,500) and C (58,500) are greater than 50,000. Eliminate them immediately. You are left with only A and D.

🔗 Mains Connection

Mains GS-3 (Government Budgeting): A high Primary Deficit indicates that the government's current discretionary spending is unsustainable, forcing it to borrow just to run the administration, irrespective of past debt obligations. Zero Primary Deficit means borrowing is solely to service past debt.

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SIMILAR QUESTIONS

CDS-II · 2017 · Q76 Relevance score: 1.07

Match List-I with List-II and select the correct answer using the code given below the Lists : List-I List-n (Type of Deficit) (Explanation) A. Fiscal Deficit 1. Total Expenditure - Revenue Receipts 8s Non-debt Capital Receipts B. Revenue Deficit 2. Revenue Expenditure -Revenue Receipts C. Effective Revenue 3. Revenue Deficit -Deficit Grants for Creation of Capital Assets D. Primary Deficit 4. Fiscal Deficit - Interest Payments Code :

IAS · 1999 · Q100 Relevance score: 0.86

Assertion (A) : Fiscal deficit is greater than budgetary deficit. Reason (R) : Fiscal deficit is the borrowings from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.

IAS · 1994 · Q15 Relevance score: 0.57

Fiscal deficit in the Union Budget means

CDS-I · 2021 · Q34 Relevance score: 0.12

The excess of total expenditure of Government over its total receipts, excluding borrowings, is known as