Revenue deficit is estimated to be Rs. 20,000 crore, and borrowing is estimated to be Rs. 15,000 crore. If expenditure on interest payments is estimated to be 50% of the revenue deficit, find fiscal deficit and primary deficit.

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Solution

Fiscal Deficit = Borrowing = Rs. 15,000 crore

Interest Payment = 50% of Revenue deficit

= 50% of Rs. 20,000 crore

= Rs. 10,000 crore

Primary Deficit = Fiscal deficit - Interest payment

= Rs. 15,000 crore - Rs. 10,000 crore

= Rs. 5,000 crore

Fiscal deficit = Rs. 15,000 crore

Primary deficit = Rs. 5,000 crore

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