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.

(a) I and II only
(b) II and III only
(c) I and III only
(d) I, II and III

The correct answer is (d) I, II and III.

Here is the step-by-step calculation for each statement based on the data provided:

Given Data:
- Revenue Expenditure = ₹ 80,000 crores
- Revenue Receipts = ₹ 60,000 crores
- Borrowings = ₹ 10,000 crores
- Interest Payments = ₹ 6,000 crores

Statement I: Revenue deficit is ₹ 20,000 crores.
- Formula: Revenue Deficit = Revenue Expenditure – Revenue Receipts
- Calculation: [latex]₹ 80,000 \text{ crores} – ₹ 60,000 \text{ crores} = ₹ 20,000 \text{ crores}[/latex]
- Conclusion: Statement I is correct.
Statement II: Fiscal deficit is ₹ 10,000 crores.
- Formula: The fiscal deficit is, by definition, the total borrowing requirement of the government.
- Calculation: The problem directly states the government’s “borrowings of ₹ 10,000 crores.”
- Conclusion: Statement II is correct.
Statement III: Primary deficit is ₹ 4,000 crores.
- Formula: Primary Deficit = Fiscal Deficit – Interest Payments
- Calculation: [latex]₹ 10,000 \text{ crores (Fiscal Deficit)} – ₹ 6,000 \text{ crores (Interest Payments)} = ₹ 4,000 \text{ crores}[/latex]
- Conclusion: Statement III is correct.

Since all three statements are correct, the correct option is (d).

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This question tests the three main types of deficits used to analyze a government’s financial health.

Revenue Deficit: This occurs when the government’s daily spending (Revenue Expenditure, like salaries, subsidies, and interest) is higher than its daily income (Revenue Receipts, like taxes). A high revenue deficit is generally considered unhealthy as it means the government is borrowing to finance its day-to-day consumption, not for long-term investments.
Fiscal Deficit: This is the most comprehensive measure. It represents the difference between the government’s total expenditure and its total receipts (excluding borrowings). It is the total amount the government needs to borrow for the year. It is a key indicator of the government’s impact on the economy and the national debt.
Primary Deficit: This is the “purest” measure of the current government’s fiscal management. It is the Fiscal Deficit minus interest payments on all the loans taken in previous years.
- A high primary deficit means the government is borrowing heavily for new spending, not just to service old debt.
- A low or zero primary deficit implies that the government’s current income is sufficient to cover its current spending (excluding interest), and it is only borrowing to meet its past obligations.