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.

Correct Answer

(d) I, II and III

Explanation of the Correct Answer

• I – correct. Revenue deficit = revenue expenditure − revenue receipts = ₹80,000 − ₹60,000 = ₹20,000 crore.
• II – correct. Fiscal deficit is the government's total borrowing requirement (total expenditure − revenue receipts − non-debt capital receipts). The borrowings shown, ₹10,000 crore, are therefore the fiscal deficit.
• III – correct. Primary deficit = fiscal deficit − interest payments = ₹10,000 − ₹6,000 = ₹4,000 crore.

Why Other Options Are Incorrect

• (a) I and II only, (b) II and III only and (c) I and III only each leave out a true statement. Note that statement III can only be true if statement II is, because the primary deficit is worked out from the fiscal deficit.

Key Takeaways

• Fiscal deficit = borrowings; primary deficit = fiscal deficit − interest; revenue deficit = revenue expenditure − revenue receipts.
• The figures are stylised: a revenue deficit larger than the fiscal deficit implies a large surplus on the capital account. UPSC tests the definitions, not whether the budget is realistic.