Primary Deficit in Economics refers to the fiscal deficit of a government excluding interest payments on its previous borrowings. It is calculated as:

Primary Deficit = Fiscal Deficit – Interest Payments

This metric helps understand the current financial health of a government by isolating the impact of past debt. While fiscal deficit shows the overall borrowing requirement, the primary deficit reveals whether the government is managing its current income and expenditure efficiently, without being burdened by past loans.

The primary deficit is a crucial indicator for assessing the sustainability of public finances. A zero or negative primary deficit (known as a primary surplus) suggests that the government’s current revenues are enough to meet its non-interest expenditures, which is a healthy sign. On the other hand, a high primary deficit implies that even excluding interest payments, the government is overspending, which could lead to further debt accumulation and macroeconomic instability. For policymakers, managing the primary deficit is key to maintaining fiscal discipline and ensuring long-term debt sustainability. It also plays a critical role in economic planning, especially in developing countries like India, where managing public debt while ensuring growth and welfare spending requires a fine balance.