To obtain an estimate of borrowing on account of current expenditures exceeding revenues, we need to calculate what has been called the primary…

Option 1 -> This gives overall deficit, not primary deficit.

Option 2 -> Correctly defines gross primary deficit by removing interest payment obligations from gross fiscal deficit.

Option 3 -> This describes sources of borrowing, not the calculation of primary deficit.

Option 4 -> This is the formula for Gross Fiscal Deficit, not Primary Deficit.

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Hence, Option 2: Gross fiscal deficit - Net interest liabilities -> Gross Primary Deficit is calculated by subtracting net interest liabilities from the gross fiscal deficit. This measure excludes interest payments (which are obligations from past borrowings) to show the government's current borrowing requirement for meeting current expenditures. It indicates whether the government needs to borrow for its current operations, excluding the debt servicing burden. This is a crucial indicator as it reflects the extent to which current revenues fall short of current expenditures, excluding the cost of past debt. -> correct