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What is Primary Deficit
Primary deficit refers to the difference between the current year's fiscal deficit and interest payment on previous borrowings. It indicates the borrowing requirements of the government, excluding interest. It also shows how much of the government’s expenses, other than interest payment, can be met through borrowings.
Primary deficit can be calculated by finding the difference between current year’s fiscal deficit and interest payment on the borrowings for the previous year.
What is the difference between primary deficit and fiscal deficit?
Primary deficit indicates the amount of borrowing which the government needs excluding the interest component. Fiscal deficit, on the other hand, is the difference between the government's total expenditure and total income. In other words, primary deficit is the difference between the government’s income-expenditure gap and its interest payment on previous borrowings.
How is primary deficit calculated?
Primary deficit can be calculated by deducting interest payments for the borrowings from the current year’s fiscal deficit. Fiscal deficit can be calculated by finding the difference between the total income and total expenditure of the government.
Latest Updates on Primary Deficit
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The parameter, which excludes interest payments on govt borrowings, has declined to 0.2% of GDP in the revised estimate, from 0.3% in budget estimate; govt aims to eliminate it in 2020-21 and 2021-22
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Widening of the deficit caused by front-loading of expenditure
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Formal fiscal consolidation papers presented to Parliament are silent on India's primary deficit