Suppose the revenue expenditure is ₹ 80,000 crores and the revenue receipts of the Government are ₹ 60,000 crores. The Government budget also shows borrowings of ₹ 10,000 crores and interest payments of ₹ 6,000 crores. Which of the following statements are correct?
- I.Revenue deficit is ₹ 20,000 crores.
- II.Fiscal deficit is ₹ 10,000 crores.
- III.Primary deficit is ₹ 4,000 crores.
Select the correct answer using the code given below.
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Answer: D. Statement I is correct: Revenue deficit = revenue expenditure - revenue receipts = 80,000 - 60,000 = ₹20,000 crore. Statement II is correct: Fiscal deficit equals the government's total borrowing, which is ₹10,000 crore. Statement III is correct: Primary deficit = fiscal deficit - interest payments = 10,000 - 6,000 = ₹4,000 crore. So all three are correct.
Watch for: Students think fiscal deficit must be larger than revenue deficit; here you must simply apply the definitions: fiscal deficit = borrowings.
Why the other options are wrong
- A. Statement III is also correct (10,000 - 6,000 = 4,000), so I and II only is wrong.
- B. Statement I is also correct (80,000 - 60,000 = 20,000), so II and III only is wrong.
- C. Statement II is also correct, since fiscal deficit equals borrowings, so I and III only is wrong.
Source to check: NCERT Class XII 'Introductory Macroeconomics', chapter on Government Budget and the Economy
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.