A primary budget deficit refers to the amount by which government spending exceeds government tax revenues.

It does not include the additional cost of debt interest payments on the government bonds.

In commerce, a primary deficit is the deficit which is derived after deducting the interest payments component from the total deficit of any budget. In other words, the total of primary deficit and interest payments makes up the total or fiscal deficit. The opposite of a primary deficit is a primary surplus.

"Higher fiscal deficit in India has been one of the major reasons for higher level of inflation in the Indian economy as compared to other developing and developed nations. The cycle of high deficit and high inflation can be explained in two different ways. Firstly, high fiscal deficit indicates a high level of government borrowing that has a tendency to reduce the availability of capital. This leads to lower liquidity and consequently higher interest rates and higher inflation.

On the other hand, assuming that the government is borrowing to invest in the economy, this leads to increased spending that leads to greater money supply in the economy which can further lead to inflation if output fails to keep pace with this increased amount of spending (which has usually been the case in India). Further, to curb a rise in the level of inflation, the central bank resorts to a hike in interest rates. Thus, we see that high fiscal deficits could lead to higher interest rates and it could further fuel inflation in the economy if not checked adequately."

"Higher fiscal deficit in India has been one of the major reasons for higher level of inflation in the Indian economy as compared to other developing and developed nations. The cycle of high deficit and high inflation can be explained in two different ways. Firstly, high fiscal deficit indicates a high level of government borrowing that has a tendency to reduce the availability of capital. This leads to lower liquidity and consequently higher interest rates and higher inflation.

On the other hand, assuming that the government is borrowing to invest in the economy, this leads to increased spending that leads to greater money supply in the economy which can further lead to inflation if output fails to keep pace with this increased amount of spending (which has usually been the case in India). Further, to curb a rise in the level of inflation, the central bank resorts to a hike in interest rates. Thus, we see that high fiscal deficits could lead to higher interest rates and it could further fuel inflation in the economy if not checked adequately.

Primary deficit corresponds to the net borrowing, which is required to meet the expenditure excluding the interest payment. Primary Deficit = (Fiscal Deficit Interest Payment) Statistical reports: Primary deficit ( in India)

In the fiscal year 1999-2000: primary deficit was (-) Rs.2598.72 crore
In the fiscal year 2000-2001: primary deficit was (-) Rs.1038.38 crore In the fiscal year 2001-2002: primary deficit was (-) Rs.2598.72 crore

Over the last few year the fiscal status of India has improved. In the fiscal year 2006-07, the revenue deficit in India was 2%, primary deficit was 0.1% and fiscal deficit was 3.7 percent. The government of India budget for 2007-08 predicts a revenue deficit of 1.5%, primary deficit of -0.2% and fiscal deficit of 3.3 percent.