UPSC Prelims 2001 Q73: Indian Economy – Fiscal Policy & Budget
Match List I with List II
and select the correct answer using the codes given below the Lists:
List I (Term)
I. Fiscal deficit
II. Budget deficit
III. Revenue deficit
IV. Primary deficit
List II (Explanation)
A) Excess of Total Expenditure over Total Receipts
B) Excess of Revenue Expenditure over Revenue Receipts
C) Excess of Total Expenditure over Total Receipts less borrowings
D) Excess of Total Expenditure over Total Receipts less borrowings and Interest Payments
- (a) I - C, II - A, III - B, IV - D
- (b) I - D, II - C, III - B, IV - A
- (c) I - A, II - C, III - B, IV - D
- (d) I - C, II - A, III - D, IV - B
Answer: (a) I - C, II - A, III - B, IV - D
Explanation
Matching deficit terms with their meanings
| Term (List I) | Explanation (List II) |
|---|---|
| I. Fiscal deficit | C. Total expenditure minus total receipts excluding borrowings |
| II. Budget deficit | A. Total expenditure minus total receipts |
| III. Revenue deficit | B. Revenue expenditure minus revenue receipts |
| IV. Primary deficit | D. Fiscal deficit minus interest payments |
Fiscal deficit equals the Government's borrowing need: spending over receipts other than borrowings. Primary deficit removes interest payments from it. Revenue deficit compares only revenue items. The old budget deficit compared all expenditure with all receipts.
Answer: (a) I - C, II - A, III - B, IV - D.
Why each option is right or wrong
- (a) CORRECT. Fiscal–C, Budget–A, Revenue–B, Primary–D.
- (b) Incorrect. Fiscal deficit is not net of interest; that is the primary deficit.
- (c) Incorrect. Fiscal and budget deficits are swapped.
- (d) Incorrect. Revenue and primary deficits are swapped.
Key point
FRBM Act, 2003 targets the fiscal deficit; India stopped using 'budget deficit' after 1997-98, when ad hoc Treasury bills ended.
Remember
Fiscal deficit − interest payments = primary deficit.
Common mistakes
- Swapping fiscal and budget deficit.
- Forgetting that primary deficit removes interest payments.
- Mixing revenue deficit with fiscal deficit.
Exam tip
Fiscal deficit = borrowing; primary = borrowing minus interest.
Sources
- NCERT Class XII — Introductory Macroeconomics, chapter 'Government Budget and the Economy'
- Fiscal Responsibility and Budget Management Act, 2003