PRIMARY DEFICIT (PD): PD= FD - INTEREST PAYMENTS MEANING OF | jayantparikshit

PRIMARY DEFICIT (PD):

PD= FD - INTEREST PAYMENTS

MEANING OF PD:
When gov borrows/takes loan to meet it’s expenditure needs, the the expenditure also includes the interest amount.
Now, if we deduct interest payments (or amount) from gov borrowings, we would arrive at the “amount of borrowing which gov can actually utilize in things other than to pay interest.” This amount is called as PD.
MEANING OF “PD=0”:
If PD=0, FD= INTEREST PAYMENTS
It means that gov has borrowed just to pay its previous interest obligations and NOTHING NEW IS ADDED TO EXISTING LOAN otherwise.
Hence, N.K.Singh Committee has kept a target of PD=0. Also, N.K.Singh set it zero because an increasing PD would also reflect in an increasing overall Debt-to-GDP Ratio of India.