Gross fiscal deficit minus net interest payments is equal to:

To understand this, it helps to know the main types of deficit used in the Indian budget:

Fiscal deficit is the difference between the government's total expenditure and its total receipts excluding borrowings. In other words, it shows the total amount the government needs to borrow in a year. Fiscal deficit = Total expenditure – (Revenue receipts + non-debt capital receipts, such as recovery of loans and disinvestment).

Primary deficit is the fiscal deficit minus interest payments. Interest payments are the cost of loans taken in earlier years. By removing them, the primary deficit shows how much the government is borrowing to meet its current spending, other than paying interest on past debt. Primary deficit = Fiscal deficit – Interest payments. When net interest payments (interest paid minus interest received) are used, the result is the gross primary deficit.

Revenue deficit is the excess of revenue expenditure over revenue receipts. It shows that the government is borrowing to meet day-to-day expenses, such as salaries and subsidies, which do not create assets.

Effective revenue deficit is the revenue deficit minus grants given to states for the creation of capital assets. This concept was introduced in the Union Budget of 2011-12.

A primary deficit of zero means that the government is borrowing only to pay interest on its old loans. A large fiscal deficit financed by borrowing increases public debt and future interest burdens.

The fiscal deficit of the Centre was budgeted at 4.4% of GDP for 2025-26.

Why not the other options?

• ✗Revenue deficit is revenue expenditure minus revenue receipts.
• ✗Budget deficit is total expenditure minus total receipts; it is no longer used in the Indian budget.
• ✗Effective revenue deficit is the revenue deficit minus grants for creating capital assets.