Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings of ₹10,000 crores and interest payments of ₹6,000 crores. Which of the following statements are correct? [Fiscal Policy]

I. Revenue deficit is ₹20,000 crores.

II. Fiscal deficit is ₹10,000 crores.

III. Primary deficit is ₹4,000 crores.

Select the correct answer using the code given below.

The correct answer is I, II and III.

Let us understand why all three statements are correct by calculating each deficit step-by-step using the standard fiscal formulas.

1. Calculation of Revenue Deficit (Statement I):
Revenue deficit occurs when the government's revenue expenditure exceeds its revenue receipts.
The formula for Revenue Deficit is:
$$\text{Revenue Deficit}=\text{Revenue Expenditure}-\text{Revenue Receipts}$$ Given:
Revenue Expenditure = ₹80,000 crores
Revenue Receipts = ₹60,000 crores
Substituting these values:
$$\text{Revenue Deficit}=\mathrm{80,000}-\mathrm{60,000}=\text{₹20,000 crores}$$ Therefore, Statement I is correct.

2. Calculation of Fiscal Deficit (Statement II):
Fiscal deficit represents the total borrowings required by the government to meet its expenses. By definition, the fiscal deficit of the government is equal to its total borrowings.
Given:
Borrowings = ₹10,000 crores
Therefore:
$$\text{Fiscal Deficit}=\text{Borrowings}=\text{₹10,000 crores}$$ Hence, Statement II is correct.

3. Calculation of Primary Deficit (Statement III):
Primary deficit is calculated by deducting interest payments on accumulated debts from the fiscal deficit.
The formula for Primary Deficit is:
$$\text{Primary Deficit}=\text{Fiscal Deficit}-\text{Interest Payments}$$ Given:
Fiscal Deficit = ₹10,000 crores
Interest Payments = ₹6,000 crores
Substituting these values:
$$\text{Primary Deficit}=\mathrm{10,000}-\mathrm{6,000}=\text{₹4,000 crores}$$ Therefore, Statement III is also correct.

Since Statements I, II, and III are all mathematically and conceptually correct, the correct option is indeed I, II and III.