Which of the following is the correct formula for calculating gross primary deficit?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Gross fiscal deficit − Net interest liabilities.
The correct formula for calculating Gross Primary Deficit is:
Gross Fiscal Deficit − Net Interest Liabilities
Gross Primary Deficit refers to the fiscal deficit of a government excluding interest payments on previous borrowings. It reflects the current fiscal position without the burden of past debt. By subtracting net interest liabilities from the gross fiscal deficit, it gives a clearer picture of how much the government is borrowing to meet expenses other than interest payments. This measure helps assess the sustainability of fiscal policies.