Consider the following statements about Primary deficit reflected in the Annual Budget of the Union ...........

Economic Affairs Public Finance and Debt Management

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Consider the following statements about Primary deficit reflected in the Annual Budget of the Union Government:

1. This deficit is the sum of Fiscal deficit and interest payments.

2. Fiscal deficit is a better indicator of loans taken and given by the government in the past than Primary deficit.

Which of the statements given above is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Primary deficit is one of the parts of fiscal deficit. While fiscal deficit is the difference between total revenue and expenditure, primary deficit can be arrived by deducting interest payment from fiscaldeficit. Interest payment is the payment that a government makes on its borrowings to the creditors.