Question

Read the following statements : Assertion (A) and Reason (R). Choose the correct option from those given below :

Assertion (A) : Borrowing requirements of the government include interest obligations on debt as well.

Reason (R) : The goal of measuring primary deficit is to correct the prevailing fiscal imbalances.

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
• C. Assertion (A) is true, but Reason (R) is false.
• D. Assertion (A) is false, but Reason (R) is true.

Hint:

Fiscal deficit (the borrowing need) includes interest, so A is true. Primary deficit only measures the current imbalance; it does not correct it, so R is false.

Answer 1

The Correct Option is C

Step 1: Understand the terms:
Fiscal deficit = total expenditure - total receipts excluding borrowing. It equals the borrowing requirement of the government.
Primary deficit = fiscal deficit - interest payments.

Step 2: Check Assertion (A):
The fiscal deficit shows the borrowing needed in a year. It includes the interest the government pays on earlier debt.
So the borrowing requirement includes interest obligations. (A) is TRUE.

Step 3: Check Reason (R):
Primary deficit removes interest payments from the borrowing need. So it shows how much borrowing is needed for current spending other than interest.
It measures the present fiscal imbalance. It does not by itself correct it. The statement that its goal is to correct the imbalance is not right. (R) is FALSE as given in the marking scheme.

Step 4: Choose the option:
(A) is true and (R) is false, so option (C) is right.
Options (A) and (B) need R to be true, which it is not. Option (D) says A is false, but A is true.

Final Answer:
Assertion (A) is true, but Reason (R) is false. Option (C).