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Fiscal Policy and Revenue (Part – II)

📆 October 14, 2024

Total Questions: 50

11. With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure? [I.A.S (Pre) 2014]

1. Defence expenditure

2. Interest payments

3. Salaries and pensions

4. Subsidies

Select the correct answer using the code given below:

Correct Answer: (c) 1, 2, 3 and 4
Solution:Earlier (before Union Budget 2017-18) in the budget estimates, there was plan and non-plan classification of the Government's expenditure. Non-Plan expenditure of the Government consisted of subsidies, interest payments, defence services expenditure, maintenance expenditure for the infrastructure created in the previous plans, salaries and pensions payments, statutory transfers to the States and U.T. Governments etc. While all expenditure done in the name of planning (i.e. Five Year Plans) were called Plan Expenditure. Budget 2017-18 brought 3 major reforms. First, presentation of Budget advanced to 1" February to enable the Ministries to operationalise all activities from the commencement of the financial year. Second, merger of Railway Budget with the General Budget and third, removal of Plan and Non-Plan classification of expenditure.

12. In the Union Budgets in India, which one of the following is the largest in amount? [U.P.P.C.S. (Pre) 2006*]

Correct Answer: (c) Revenue expenditure
Solution:Before 2017-18 Union Budget estimates of expenditure were generally classified on two different bases: (1) Division in Before 2017-18 Union Budget estimates of expenditure were Plan and Non-Plan expenditure, and (2) Division in Revenue and Capital expenditure. Revenue expenditure has the largest amount of expenditure in the Union Budget of India. The Plan and Non-Plan expenditure classification was removed from Budget 2017-18.

13. Which one of the following did not take place in the Union Budget for 2017-18? [U.P.R.O./A.R.O. (Pre) 2017]

Correct Answer: (b) Increase in the number of centrally sponsored
Solution:Union Budget 2017-18 (Presented before the Parliament on 1 February, 2017) contained 3 major reforms:

(i) Advancement of date of presentation of Union Budget almost by a month (from February-end to 1 February);

(ii) Merger of Railway Budget with the General Budget, i.e. bringing Railway finances into the mainstream budgeting.

(iii) Elimination of the classification of expenditure into "Plan" and "Non-Plan

Increase in the number of centrally sponsored schemes did not take place in the Union Budget 2017-18.

14. In which year was the Railway Budget merged with the General Budget in India? [B.P.S.C (Pre) 2022]

Correct Answer: (c) 2017
Solution:Union Budget 2017-18 (Presented before the Parliament on 1 February, 2017) contained 3 major reforms:

(i) Advancement of date of presentation of Union Budget almost by a month (from February-end to 1 February);

(ii) Merger of Railway Budget with the General Budget, i.e. bringing Railway finances into the mainstream budgeting.

(iii) Elimination of the classification of expenditure into "Plan" and "Non-Plan

Increase in the number of centrally sponsored schemes did not take place in the Union Budget 2017-18.

15. In which of the following budget, the Railway Budget was merged with the Union Budget in India? [I.A.S (Pre) 2016]

1. Reducing revenue expenditure

2. Introducing new welfare schemes

3. Rationalizing subsidies

4. Expanding industries

Select the correct answer using the following code given below:

Correct Answer: (c) 1 and 3 only
Solution:The Government can reduce fiscal deficit by decreasing revenue expenditure and increasing revenue receipts. Unnecessary revenue expenditure bloats the fiscal deficit, and since it forms the majority of Government spending, its reduction has a very large effect on the fiscal deficit. Initiating new welfare schemes will increase revenue expenditure while reducing import duty will reduce revenue receipts. Hence, both will cause the increase in deficit, Subsidies are a major component of revenue expenditure, and its rationalization will reduce this and cut down fiscal deficit. Hence, option (c) is the correct answer. Expanding industries by budgetary support will not add anything in the short-run to the tax revenues of the Government, and thus will increase the deficit.

16. Which among the following is the most important item of revenue expenditure of the Union Government? [U.P.P.C.S. (Mains) 2017]

Correct Answer: (d) Interest Payment
Solution:Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

17. In the Union Budget the largest item of revenue expenditure is: [U.P.P.C.S. (Pre) 2005, Uttarakhand U.D.A./L.D.A. (Pre) 2003]

Correct Answer: (c) Interest payments
Solution:Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

18. Interest payment is an item of: [B.P.S.C (Pre) 2015]

Correct Answer: (a) Revenue expenditure
Solution:Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

19. Which one of the following is the most important item of expenditure of the Union Government on revenue account? [U.P.P.C.S. (Spl.) (Mains) 2008, U.P.P.C.S. (Pre) 1999, U.P. Lower Sub.(Spl.) (Pre) 2004]

Correct Answer: (b) Interest payments
Solution:Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

20. The largest item of public expenditure in the Union Budgets in recent years is: [U.P.P.C.S. (Mains) 2006]

Correct Answer: (b) Interest payments
Solution:Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.
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