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? [Fiscal Policy]

The correct option is ₹48,500 crores.

To understand why this option is correct, let us break down the concepts and calculations step-by-step.

1. Understanding the Concept of Gross Primary Deficit:
The primary deficit measures the government's borrowing requirements, excluding interest payments on accumulated past debts. It shows how much of the government's current expenditure (other than interest liabilities) cannot be met by its current revenues and non-debt receipts. The formula to calculate Gross Primary Deficit is:

Gross Primary Deficit = Gross Fiscal Deficit - Interest Liabilities

2. Identifying the Given Values:
From the question, we are given the following values:
• Gross Fiscal Deficit = ₹50,000 crores
• Interest Liabilities = ₹1,500 crores
Note: The non-debt creating capital receipts (₹10,000 crores) are already accounted for in the calculation of the fiscal deficit itself, as fiscal deficit is defined as the total expenditure minus total receipts excluding borrowings (which includes revenue receipts and non-debt creating capital receipts). Therefore, we do not subtract it again.

3. Calculating the Gross Primary Deficit:
Substituting the given values into the primary deficit formula:

$\text{Gross Primary Deficit}=\text{₹50,000 crores}-\text{₹1,500 crores}$

$\text{Gross Primary Deficit}=\text{₹48,500 crores}$

Thus, the gross primary deficit of the country is ₹48,500 crores, which matches the correct option.