| Consider the following: |
| 1. Primary deficit = Fiscal deficit - Interest Payments. |
| 2. The Primary deficit shows the extent to which government is borrowing even if there is no interest is to be paid. Which of these statements is/are correct? |
A) Only 1
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :
[c] Gross Primary Deficit is Gross Fiscal Deficit less interest payments. Net Primary Deficit is Net Fiscal Deficit minus net interest payments. A shrinking primary deficit indicates progress towards fiscal health. The Budget document also mentions deficit as a percentage of GDP. This is to facilitate comparison and also get a proper perspective. Prudent fiscal management requires that the government does not borrow to consume in the normal course.
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