Difference between Primary Deficit and Fiscal Deficit

A Budgetary Deficit can be termed as the excess of the total government expenditure over the total revenue generated in a financial year. A budgetary deficit happens when the government spends more money than what is generated through revenue collection, including direct or indirect taxes. Based on the deficit incurred has been divided into three forms, i.e., Revenue Deficit, Fiscal Deficit, and Primary Deficit.

What is Primary Deficit?

Primary Deficit is the difference between the fiscal deficit (total income – total expenditure of the government) of the current year and the interest paid on the borrowings of the previous year. It indicates the borrowing requirements of the government for the purposes, excluding the interest payment

Primary Deficit = Fiscal Deficit – Interest Payment

What is Fiscal Deficit?

The fiscal deficit refers to the excess of total expenditure over total receipts/income, excluding borrowings, in a fiscal year. It mainly focuses on the borrowings of the government. It is mainly used to explain and understand the budgetary development in India. Fiscal Deficits happen when the government spends more than it is supposed to.

Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings)

OR

= (Revenue Expenditure + Capital Expenditure) – (Revenue Receipts + Capital Receipts excluding Borrowings)

OR

= (Revenue Expenditure – Revenue Receipts) + (Capital Expenditure – Capital Receipts excluding Borrowings)

OR

= Revenue Deficit + (Capital Expenditure – Capital Receipts excluding Borrowings)

Difference between Primary Deficit and Fiscal Deficit

Basis	Primary Deficit	Fiscal Deficit
Meaning	It is the difference between the fiscal deficit (total income – total expenditure of the government) of the current year and the interest paid on the borrowings of the previous year.	It is the excess of total expenditure over total receipts/income, excluding borrowings in a fiscal year.
Indicator	Primary Deficit indicates the government’s total borrowing requirements, except interest.	Fiscal Deficit indicates the government’s total borrowing requirements, including interest.
Formula	Primary Deficit = Fiscal Deficit – Interest Payment	Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings)