Q. Consider the following statements:

1. The goal of measuring primary deficit is to focus on present fiscal imbalances.
2. Net interest liabilities also consist of interest payments including interest receipts by the government on net domestic lending.

Which of the above is / are correct?
Answer: Only 1
Notes: Only the first statement is correct. The second statement is incorrect. The goal of measuring primary deficit is to focus on present fiscal imbalances. To obtain an estimate of borrowing on account of current expenditures exceeding revenues, we need to calculate what has been called the primary deficit. It is simply the fiscal deficit minus the interest payments.

• Gross primary deficit = Gross fiscal deficit - Net interest liabilities.

Net interest liabilities consist of interest payments minus interest receipts by the government on net domestic lending.