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?  

1. Revenue deficit is 20,000 crores.   
2. Fiscal deficit is 10,000 crores.   
3. Primary deficit is 4,000 crores.    

Select the correct answer using the code given below.    

• I and II only    
• II and III only    
• I and III only    
• I, II and III   

Answer: (d) I, II and III  

Explanation:

• Revenue Expenditure = ₹80,000 crores
• Revenue Receipts = ₹60,000 crores
• Borrowings (Fiscal Deficit) = ₹10,000 crores
• Interest Payments = ₹6,000 crores

Statement I is correct: Revenue Deficit

• Revenue Deficit = Revenue Expenditure – Revenue Receipts
• Calculation:
  • Revenue Expenditure = ₹80,000 crores
  • Revenue Receipts = ₹60,000 crores
  • So, Revenue Deficit = ₹80,000 – ₹60,000 = ₹20,000 crores

Statement II is correct: Fiscal Deficit

• Fiscal Deficit = Total Expenditure – Total Receipts (excluding borrowings)
  • In this question, total borrowings by the government are ₹10,000 crores, which means the gap between the government’s total expenditure and its non-borrowed receipts is being met by borrowing ₹10,000 crores.
  • Fiscal Deficit is the total borrowing requirement of the government. In the given scenario, the borrowings directly represent the fiscal deficit.
  • Fiscal Deficit = Borrowings = 10,000 crores

Statement III is correct: Primary Deficit

• Primary Deficit = Fiscal Deficit – Interest Payments
• Calculation:
  • Fiscal Deficit = ₹10,000 crores
  • Interest Payments = ₹6,000 crores
  • Primary Deficit = ₹10,000 – ₹6,000 = ₹4,000 crores

Hence, All three statements are correct.