📘 IAS Prelims 2025 — GS-III Q.65 | Classroom Explanation

(Fiscal Deficit vs Primary Deficit | Conceptual Clarity)

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📌 Question Recap

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?

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✅ Correct Answer: (a) ₹48,500 crores

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🧑‍🏫 Step-by-Step Conceptual Explanation

🔹 1. Fiscal Deficit (Already Given)

• Fiscal Deficit represents the total borrowing requirement of the government.
• It already accounts for:
  • Revenue receipts
  • Non-debt capital receipts
  • Total expenditure

📌 Since the question directly gives fiscal deficit as ₹50,000 crores,
👉 No recalculation is required.

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🔹 2. What is Primary Deficit? (CORE CONCEPT)

Primary Deficit = Fiscal Deficit − Interest Payments

• It shows how much the government is borrowing excluding past debt obligations.
• It reflects the current fiscal stance of the government.

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🔹 3. Apply the Formula

$$\text{Gross Primary Deficit} = 50{,}000 − 1{,}500 = \boxed{48{,}500 \text{ crores}}$$Gross Primary Deficit=50,000−1,500=48,500 crores​

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✅ Answer: (a) ₹48,500 crores

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📚 Value-Added Notes (Prelims Enrichment)

🔸 1. Why “Non-Debt Capital Receipts” Are Mentioned

Examples include:

• Disinvestment
• Recovery of loans
• Sale of assets

📌 These reduce fiscal deficit, but since fiscal deficit is already given,
👉 they do not affect primary deficit calculation here.

⚠️ UPSC Trap: Many aspirants wrongly subtract ₹10,000 crores again.

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🔸 2. Economic Meaning of Primary Deficit

Scenario	Interpretation
High Fiscal + Low Primary Deficit	Debt burden due to past loans
High Primary Deficit	Current spending unsustainable
Zero Primary Deficit	Borrowing only to pay interest

📌 IMF and rating agencies focus heavily on primary deficit trends.

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🔸 3. Gross vs Net Primary Deficit (Conceptual Awareness)

• Gross Primary Deficit:
  Fiscal Deficit − Interest Payments (used in Prelims)
• Net Primary Deficit:
  Adjusted further for interest receipts (rarely asked in UPSC)

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🔸 4. Policy Relevance (India Context)

• India aims to:
  • Reduce primary deficit before fiscal deficit
  • Improve debt sustainability
• FRBM targets indirectly focus on primary balance

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🧠 Final Answer Snapshot

• Fiscal Deficit = ₹50,000 crores
• Interest Payments = ₹1,500 crores
• Gross Primary Deficit = ₹48,500 crores

✅ Correct Answer: (a)

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