Question

Match List I with List II 
Choose the correct answer from the options given below: 
 

• A. A - II, B - III, C - IV, D - I
• B. A - II, B - I, C - IV, D - III
• C. A - III, B - II, C - I, D - IV
• D. A - III, B - IV, C - I, D - II

Hint:

Keep in mind these basic relationships:
- "Primary" always implies the exclusion of Interest Payments.
- "Effective" always implies the exclusion of Capital Grants.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
In public finance and government budgeting, deficits are indicators used to assess the gap between government expenditure and income.
Understanding these terms helps in analyzing fiscal policy, borrowing requirements, and overall macroeconomic stability.

Step 2: Detailed Explanation:
Let us analyze each term in List I and match it with its correct conceptual definition in List II:
- A. Revenue Deficit: This represents the excess of the government's revenue expenditure over its revenue receipts. It indicates that the government's day-to-day consumption expenses exceed its current revenues.
Formula: \[ \text{Revenue Deficit} = \text{Revenue Expenditure} - \text{Revenue Receipts} \] This matches with II.
- B. Effective Revenue Deficit: Introduced in India in the 2011-12 Union Budget, this measures the difference between the revenue deficit and the grants-in-aid given to states for the creation of capital assets. This is because capital asset creation is investment-oriented rather than pure consumption.
Formula: \[ \text{Effective Revenue Deficit} = \text{Revenue Deficit} - \text{Grants for Creation of Capital Assets} \] This matches with I.
- C. Fiscal Deficit: This is the excess of total expenditure over total non-debt receipts (revenue receipts + non-debt capital receipts). It reflects the total borrowing requirements of the government from all internal and external sources.
This matches with IV.
- D. Primary Deficit: This represents the borrowing requirements of the government excluding the interest payments due on past loans. It shows how much the current year's operations are contributing to the national debt.
Formula: \[ \text{Primary Deficit} = \text{Fiscal Deficit} - \text{Interest Payments} \] This matches with III.
The correct matching sequence is: A-II, B-I, C-IV, D-III.

Step 3: Final Answer:
The correct option is (B).