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Consider the following statements.
  1. The primary deficit means that the state cannot control recurring, non-debt income expenses including subsidies and other discretionary expenditures.
  2. The growing primary deficit would lead in future to higher-income deficits and unsustainable debt maintenance
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Consider the following statements. The primary deficit means that the ...
  • Primary deficit is the revenue deficit net of interest payments and the implication is that the government is unable to contain recurring expenditure such as subsidies and other discretionary expenditures within the limits of recurring non-debt revenue. 
  • So, the primary deficit ratio is the leading indicator for the revenue deficit ratio to follow. Increasing the primary deficit is the surest route to higher revenue deficit and unsustainable debt servicing in the future.
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Most Upvoted Answer
Consider the following statements. The primary deficit means that the ...
  • Primary deficit is the revenue deficit net of interest payments and the implication is that the government is unable to contain recurring expenditure such as subsidies and other discretionary expenditures within the limits of recurring non-debt revenue. 
  • So, the primary deficit ratio is the leading indicator for the revenue deficit ratio to follow. Increasing the primary deficit is the surest route to higher revenue deficit and unsustainable debt servicing in the future.
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Consider the following statements. The primary deficit means that the state cannot control recurring, non-debt income expenses including subsidies and other discretionary expenditures. The growing primary deficit would lead in future to higher-income deficits and unsustainable debt maintenanceWhich of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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