Question
What is importance of primary deficit?
Solution
Importance. Whereas fiscal deficit reflects the borrowing requirements of the government for financing the expenditure inclusive of interest payment, primary deficit shows the borrowing requirements of the government for meeting its existing expenses other than interest payment. Thus if primary deficit is zero, then fiscal deficit is equal to interest payment. It is not adding to existing loans. Thus it indicates how much government borrowing is going to meet expenses other than interest payments. The difference between fiscal deficit and primary deficit reflects the amount of interest payments on public debt.
The following summary reflects factually India's position of revenue deficit, fiscal deficit and primary deficit.
