A country's fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹1,500 crores. What is the gross primary deficit?
- A.₹48,500 crores
- B.₹51,500 crores
- C.₹58,500 crores
- D.None of the above
Correct answer
Explanation
The correct answer is A, ₹48,500 crores. Gross primary deficit is the fiscal deficit minus interest payments: 50,000 − 1,500 = ₹48,500 crores.
The fiscal deficit is total expenditure minus total receipts other than borrowings, so it already takes account of non-debt capital receipts such as recovery of loans and disinvestment proceeds. It shows how much the government must borrow. The primary deficit removes interest payments, which arise from past borrowing, from the fiscal deficit; it shows how much of this year's borrowing is due to this year's policies. A primary deficit of zero means the government borrows only to pay interest.
B is wrong because it adds interest to the fiscal deficit instead of subtracting it. C is wrong because it adds back the ₹10,000 crore non-debt receipts and subtracts interest, counting receipts that the fiscal deficit already includes. D is wrong because A is the correct figure.
Exam tip: Primary deficit = fiscal deficit − interest payments; revenue deficit = revenue expenditure − revenue receipts.
Practice Questions
View allThe Securities and Exchange Board of India was given statutory powers by which law?
- A.The Securities Contracts (Regulation) Act, 1956
- B.The Companies Act, 1956
- C.The SEBI Act, 1992
- D.The Depositories Act, 1996
Show answer
SEBI was set up in 1988 as a non-statutory body and was given statutory status and powers by the Securities and Exchange Board of India Act, 1992, after which it became the regulator of the securities market, with its head office in Mumbai; appeals from its orders lie to the…
Read the full explanation →NASDAQ, the world's first electronic stock market, began operations in which year?
- A.1961
- B.1971
- C.1981
- D.1991
Show answer
NASDAQ opened in 1971 in the United States as the world's first electronic stock market, with quotations carried on a computer network instead of a trading floor, and it now lists most of the large American technology companies; its benchmark is the NASDAQ Composite.
Read the full explanation →Which is regarded as the first stock exchange of the world?
- A.London Stock Exchange
- B.New York Stock Exchange
- C.Amsterdam Stock Exchange
- D.Paris Bourse
Show answer
It was established in 1602 by the Dutch East India Company, whose shares were traded there continuously, and it is therefore counted as the world's first stock exchange; the exchange is now part of Euronext.
Read the full explanation →KOSPI is the principal share index of which country?
- A.Malaysia
- B.Thailand
- C.South Korea
- D.Philippines
Show answer
KOSPI stands for the Korea Composite Stock Price Index and is the benchmark of the Korea Exchange, which handles the securities market of South Korea.
Read the full explanation →DAX is the benchmark stock market index of which country?
- A.Netherlands
- B.Germany
- C.Austria
- D.Belgium
Show answer
The DAX is the benchmark index of the Frankfurt Stock Exchange and tracks the largest German companies by market capitalisation and turnover.
Read the full explanation →