In India, primary deficit = fiscal deficit - interest payments accrued on loans

  • one view is it should be as HIGH as possible because that would mean we are borrowing not to pay interest payment but for investment, wealth creation.

  • another view is it should be low because that would mean that you are not borrowing anymore to meet your expenditure.

I tried to search on the Internet but it aggravated the confusion as one of the leading newspaper in India remarked in one of its articles -“The rise in primary deficit is not the sign of a healthy economy. It means the government is spending more on interest payments instead of creating wealth.” I just couldn't understand this statement.

Never been this confused in economics. Please guide.


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