Question 89 from UPSC CSE 2025 - Economics

Question

Suppose the revenue expenditure is Rs.80,000 crores and the revenue receipts of the Government are Rs.60,000 crores. The Government budget also shows borrowings of Rs.10,000 crores and interest payments of Rs.6,000 crores. Which of the following statements are correct?
I. Revenue deficit is Rs.20,000 crores.
II. Fiscal deficit is Rs.10,000 crores.
III. Primary deficit is Rs.4,000 crores.
Select the correct answer using the code given below.

Accepted Answer

Correct Option: D. I, II, and III

Strategy: First, calculate each deficit using the given figures: revenue deficit is simply revenue expenditure minus revenue receipts, giving Rs.20,000 crores. Fiscal deficit equals total borrowings, as provided (Rs.10,000 crores), since borrowings are used to cover the gap. For primary deficit, subtract interest payments from the fiscal deficit (Rs.10,000 - Rs.6,000), resulting in Rs.4,000 crores. All three statements check out, so select the option mentioning all.

Key Info: Revenue deficit refers to the excess of revenue expenditure over revenue receipts. In this scenario: Revenue Expenditure (₹80,000 crores) minus Revenue Receipts (₹60,000 crores) yields a revenue deficit of ₹20,000 crores.

Fiscal deficit is the gap between total expenditure (revenue plus capital) and the sum of revenue receipts and non-debt capital receipts (such as recovery of loans). It is generally represented by the government's total borrowings. Given borrowings are ₹10,000 crores, the fiscal deficit is thus ₹10,000 crores, based on the budget data format.

Primary deficit is calculated as fiscal deficit minus interest payments, highlighting the borrowing requirements of the government aside from interest liabilities. Here, subtracting interest payments (₹6,000 crores) from the fiscal deficit (₹10,000 crores) yields a primary deficit of ₹4,000 crores.

Revenue expenditure is spending not creating assets (e.g., salaries, subsidies, interest), while revenue receipts are governmental earnings excluding borrowings. Fiscal and primary deficits indicate fiscal health and are crucial for budgetary evaluation and macroeconomic stability.

Answer

Option A: I and II only

Answer

Option B: II and III only

Answer

Option C: I and III only