With reference to Indian public finance, consider the following statements: 1. Primary Deficit is the difference between Fiscal Deficit and interest payments for a given year. 2. Monetised Deficit refers to that part of the fiscal deficit which is financed directly by the Reserve Bank of India. 3. Both Primary Deficit and Monetised Deficit are no longer used in India after the adoption of the FRBM Act, 2003. Which of the statements given above is/are correct? |ForumIAS

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: A

Notes:

Explanation:

Primary Deficit = Fiscal Deficit – Interest Payments. It shows how much the government is borrowing excluding interest obligations and is useful to assess current fiscal stance without legacy debt pressure.
Monetised Deficit refers to the portion of fiscal deficit financed by the RBI, typically through direct purchase of government securities or advances to the government.
While the FRBM Act, 2003 aimed at reducing direct monetisation of deficits, both terms are still in use for analytical and transparency purposes in government budgets.

Source- TMH Indian Economy by Ramesh Singh

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