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Q15) Consider the following statements about primary deficit (PD)

i) PD = Fisacal deficit + interest payment

ii) it helps in assessing the progress of government in its fiscal control efforts

which of the above statements is /are correct?



A

a) i only

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B

b) ii only

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C

c) Both

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D
d) None
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Solution

The correct option is C

b) ii only


Ans: B

Explanation:  Primary deficit refers to difference between fiscal deficit of the current year and interest payments on the previous borrowings. Primary Deficit = Fiscal Deficit Interest Payments. The total borrowing requirement of the government includes the interest commitments on accumulated debts. Primary deficit reflects the extent to which such interest commitments have compelled the government to borrow in the current period.

Implications of Primary Deficit:

It indicates, how much of the government borrowings are going to meet expenses other than the interest payments. The difference between fiscal deficit and primary deficit shows the amount of interest payments on the borrowings made in past.


Economy

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