UPSC Prelims 2025 Q65: Gross Primary Deficit Calculation — Explained
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?
- ₹ 48,500 crores
- ₹ 51,500 crores
- ₹ 58,500 crores
- None of the above
Answer: (a) ₹ 48,500 crores
Statement-wise explanation
- a: correct — Gross primary deficit is gross fiscal deficit minus interest payments. Here that is ₹50,000 crore − ₹1,500 crore = ₹48,500 crore. The ₹10,000 crore of non-debt capital receipts is not used again, because fiscal deficit is already calculated after deducting all non-debt receipts.
- b: incorrect — ₹51,500 crore comes from adding the interest to the fiscal deficit (₹50,000 + ₹1,500). Primary deficit removes interest from fiscal deficit; it does not add it. Fiscal deficit includes interest spending, so the primary deficit can never be larger than the fiscal deficit when interest is positive.
- c: incorrect — ₹58,500 crore comes from adding the ₹10,000 crore of non-debt capital receipts to the fiscal deficit and then subtracting the interest (₹50,000 + ₹10,000 − ₹1,500). This counts the non-debt capital receipts a second time. Fiscal deficit is total expenditure minus revenue receipts and non-debt capital receipts, so those receipts are already inside the ₹50,000 crore figure.
- d: incorrect — A standard formula gives a clean answer: GPD = GFD − interest payments = ₹48,500 crore. That value appears among the options, so 'None of the above' does not apply.
How to eliminate
This is a formula question. Remember one line: Primary deficit = Fiscal deficit − Interest payments. Even without the formula you can rule out two options. Primary deficit is meant to strip out the cost of past borrowing (interest), so it must be smaller than the fiscal deficit. Both ₹51,500 crore and ₹58,500 crore are larger than ₹50,000 crore, so both go. The ₹10,000 crore of non-debt capital receipts is a distractor. Fiscal deficit is already defined as total expenditure minus all non-debt receipts (revenue receipts plus non-debt capital receipts such as loan recoveries and disinvestment), so you do not subtract or add it again. That leaves ₹48,500 crore. 'None of the above' is the trap for anyone who thinks the extra figure must be used somewhere.
Know more
The deficit family in India's Budget
Each deficit measures a different gap between what the government spends and what it earns without borrowing.
| Deficit | Formula | What it tells you |
|---|---|---|
| Revenue deficit (RD) | Revenue expenditure − Revenue receipts | Borrowing used for day-to-day spending |
| Effective revenue deficit | RD − Grants for creation of capital assets | RD after excluding grants that build assets |
| Gross fiscal deficit (GFD) | Total expenditure − (Revenue receipts + Non-debt capital receipts) | The government's total borrowing need for the year |
| Net fiscal deficit | GFD − Net domestic lending | Borrowing need after the government's own lending |
| Gross primary deficit (GPD) | GFD − Net interest payments | Borrowing need excluding interest on past debt |
| Net primary deficit | GPD − Net domestic lending | Primary deficit after the government's own lending |
Non-debt capital receipts are capital receipts that create no future liability. Examples are recoveries of loans and disinvestment proceeds. Borrowings, by contrast, are debt-creating capital receipts. That is why the government's borrowing equals its fiscal deficit.
Why primary deficit matters. Interest is a payment for decisions made in past years. Removing it shows whether current policy is adding to debt. If the primary deficit is zero, the government is borrowing only to pay interest on old loans. A primary surplus means current receipts more than cover current non-interest spending.
Official figures: The Union Budget 2025-26 set the fiscal deficit at 4.4% of GDP, down from 4.8% (RE) in 2024-25. The Budget also said that from 2026-27 the target would be a declining Central government debt-to-GDP ratio rather than an annual deficit number. Debt sustainability depends on the primary balance, growth and interest rates together.
In the news
The Union Budget 2025-26 (February 2025) cut the fiscal deficit target to 4.4% of GDP and announced a shift to a debt-to-GDP anchor from 2026-27. That put the deficit measures back in the news just before Prelims.
NCERT Concepts to Revise
- Primary deficit: The question asks for this measure directly, so you need its exact definition relative to fiscal deficit.
- Fiscal deficit: Knowing which receipts fiscal deficit already deducts tells you whether the ₹10,000 crore figure is still needed.
- Interest payments: The ₹1,500 crore interest liability is the one adjustment that links fiscal deficit to primary deficit.