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UPSC Prelims 2025, Question 61

The concept being tested: Revenue Deficit, Fiscal Deficit, Primary Deficit (definitions and calculations).

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? 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.

Options

  1. AI and II only
  2. BII and III only
  3. CI and III only
  4. DI, II and IIICorrect answer

The answer: I, II and III

Revenue deficit is the gap between revenue expenditure and revenue receipts: ₹80,000 crore minus ₹60,000 crore equals ₹20,000 crore, so statement I holds. Fiscal deficit is the total borrowing a government must undertake to bridge the shortfall between its total expenditure and its total receipts other than borrowings; the question states borrowings of ₹10,000 crore directly, and since borrowings are precisely how the fiscal deficit is financed, fiscal deficit equals ₹10,000 crore, confirming statement II. Primary deficit strips out the burden of past debt by subtracting interest payments from the fiscal deficit: ₹10,000 crore minus ₹6,000 crore leaves ₹4,000 crore, matching statement III. Since every one of the three figures given in the stem checks out against the standard definitions used in Indian government budgeting, all three statements are arithmetically and conceptually correct, which is why the answer covering all three is the intended one.

What UPSC was testing

UPSC is testing whether aspirants can chain three related budgeting identities correctly in one go, especially the point that fiscal deficit is simply the government's total borrowing figure and primary deficit is fiscal deficit net of interest payments on past borrowing; the statement-count format punishes anyone who verifies only one or two of the three figures before choosing a code.

How often this comes up

This concept has appeared 13 times in UPSC Prelims General Studies Paper I between 2015 and 2025 — in 2015, 2016, 2017, 2018, 2021, 2022 and 2025.

The option-by-option autopsy for this question — why each of the other three is wrong, and which neighbouring concept each one was built from — is in the app.

More questions on this

Other past-year questions touching Types of Deficit & Deficit Financing.

UPSC 2025 · Q65

A country's fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital…

UPSC 2025 · Q10

Consider the following statements: I. Capital receipts create a liability or cause a reduction in the assets of the…