Fiscal Policy & Revenue (Part – I)

Total Questions: 50

1. 1. Along with the Budget, the Finance Minister also places other documents before the Parliament which include 'The Macro Economic Framework Statement'. The aforesaid document is presented because this is mandated by: [I.A.S (Pre) 2020]

(a) Long standing parliamentary convention
(b) Article 112 and Article 110 (1) of the Constitution of India
(c) Article 113 of the Constitution of India
(d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003

Correct Answer: (d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003

Solution:Every year, along with the budget, the 'Macro-Economic Framework Statement is presented before the Parliament by the Finance Minister. This is mandated under section 3 (5) of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. The statement contains an overview of the economy. This includes an assessment regarding the GDP growth, fiscal balance of the central government and the external sector balance of the economy.

2. When was gender budgeting initiated in India? [B.P.S.C (Pre) (Re- Exam) 2020]

(a) Union Budget, 2005-06
(b) Union Budget, 2006-07
(c) Union Budget, 2008-09
(d) Union Budget, 2004-05
(e) None of the above / More than one of the above

Correct Answer: (a) Union Budget, 2005-06

Solution:The gender budgeting was first introduced in India in the Union Budget 2005-06. Gender budgeting is concerned with gender sensitive formulation of programmes/schemes, allocation of resources, implementation and execution, audit and impact assessment and follow-up corrective action to address gender disparities. In 2005-06, the gender budgeting constituted 4.8% of the total budget outlay, but over the years, its proportion in the budget has close to stagnated, hovering around 5%. In Interim Union Budget 2024-25, the total allocation for gender budgeting of various ministries/ departments is Rs. 309690.10 crore which is 38.6% more than the budget estimates of 2023-24. The share of Gender Budget in the total Union Budget increased to 6.5% in 2024-25 from 5% in 2023-24.

3. Which among the following is not included in the ten mains themes of the Union Budget for the financial year 2017-18? [U.P.P.C.S. (Pre) 2017]

(a) Export Performance
(b) The Poor and the underprivileged
(c) Youth
(d) Rural population

Correct Answer: (a) Export Performance

Solution:The Union Budget 2017-18 was broadly focused on 10 themes-the farming sector, the rural population, the youth, the poor and the underprivileged, infrastructure, the financial sector, digital economy, public services, prudent fiscal management and tax administration.

The Union Budget 2023-24 adopts the following seven priorities, which compliments each other and act as the 'Saptarishi' guiding us through the Amrit Kaal: (1) Inclusive Development, (ii) Reaching the Last Mile, (in) Infrastructure and Investment, (iv) Unleasing the Potential, (v) Green Growth, (vi) Youth Power, and (vii) Financial Sector.

In the Interim Union Budget 2024-25, the vision for 'Viksit Bharat by 2047' is "Prosperous Bharat in harmony with nature, with modern infrastructure, and providing opportunities for all citizens and all regions to reach their potential."

4. Which of the following is not included in the priorities of India Budget 2022-23? [B.P.S.C (Pre) (Re. Exam) 2022]

(a) PM Gati Shakti
(b) Inclusive Development
(c) Productivity Enhancement and Investment, Sunrise Opportunities, Energy Transition, and Climate Action.
(d) Disinvestment
(e) None of the above/More than one of the above

Correct Answer: (d) Disinvestment

Solution:The Union Budget 2022-23 provided impetus for growth along four priorities:

(i) PM GatiShakti (The seven engines that drive this are Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure).

(ii) Inclusive Development.

(iii) Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition and Climate Action.

(iv) Financing of Investments.

5. Which one of the following was not included in the intended objectives of the Union Budget, 2017-18? [B.P.S.C (Pre) 2018]

(a) Transform India
(b) Clean India
(c) Educate India
(d) Energise India
(e) None of the above/More than one of the above

Correct Answer: (c) Educate India

Solution:The Union Budget 2017-18 has been announced by the then Finance Minister Arun Jaitley in the Parliament on 1 February, 2017. In Union Budget 2017-18, the agenda or intended objectives for the year 2017-18 was: 'Transform, Energise and Clean India'-TEC India. TEC India sought to:

• Transform the quality of governance and quality of life of our people;

• Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential; and

• Clean the country from the evils of corruption, black money and non-transparent political funding.

6. According to the Union Budget 2021-22, Finance Minister proposed a new levy Agriculture Infrastructure and Development Cess. This cess will be levied on how many products? [U.P.P.C.S. (Pre) 2021]

(a) 12
(b) 20
(c) 25
(d) 29

Correct Answer: (d) 29

Solution:Union Budget 2021-22 proposed a new levy Agriculture Infrastructure Development Cess (AIDC). The purpose of the new AIDC is to raise funds to finance spending on developing agriculture infrastructure. Considering that not much private investment is forthcoming for agriculture, the Centre now seeks to raise a dedicated fund to meet these expenses. The new cess is levied on 29 products, prominent among which are gold, silver, imported apple, imported alcohol (excluding beer), imported pulses, imported palm oil, imported urea, and petrol/diesel including branded ones.

7. As per the Economic Survey 2015-16, which one of the following has been constructed as the Chakravyuha Challenge of the Indian economy? [U.P.P.C.S. (Pre) 2017]

(a) Movement of Indian economy from socialism to capitalism.
(b) Movement of Indian economy from socialism with.
(c) Movement of Indian economy from socialism with limited entry to marketism without exit.
(d) Movement of Indian economy from mixed economy to capitalism.

Correct Answer: (c) Movement of Indian economy from socialism with limited entry to marketism without exit.

Solution:The Economic Survey 2015-16 invokes the legend of the Chakravyuha from Mahabharat describing the ability t enter but not exit, with seriously adverse consequences The Indian Economy has made great strides in removing barriers to entry from firms, talent and technology but les progress has made in relation to exit. Thus, over the course of six decades, the Indian economy has moved from 'socialism with limited entry to marketism, without exit'

8. Which statement is true for Finance Sector (Fiscal Management) in the Union Budget, 2023? [U.P.P.C.S. (Pre) 2023]

(a) Fiscal Deficit of 3.5% of GSDP allowed for States.
(b) Budget estimates 2023-24 for total expenditure is R 55 lakh Cr.
(c) Fiscal Deficit 2025-26, the target is to be below 5.9%.
(d) Twenty years interest free loans to States.

Correct Answer: (a) Fiscal Deficit of 3.5% of GSDP allowed for States.

Solution:According to Union Budget 2023-24, Fiscal Deficit of 3.5% of GSDP was allowed for States of which 0.5% was tied to Power sector reforms. Budget estimates 2023-24 for total expenditure was about Rs. 45 lakh Cr, Fiscal Deficit 2025-26 the target was to be below 4.5% of GDP; Continuation of 50- year interest free loan to State governments for one more year to spur investment in infrastructure and to incentivize them for complementary policy actions.

In the Interim Union Budget 2024-25, total expenditure is estimated at Rs. 47.66 lakh Cr. and Fiscal Deficit is estimated at 5.1% of GDP in 2024-25.

9. Consider the following statements: [U.P.R.O/A.R.O. (Pre) 2017]

Assertion (A): Fiscal deficit of Indian Government asa percentage of GDP was higher in 2017-18 as compared to Budget estimates.

Reason (R): Growth in indirect tax collection was relatively lower during 2017-18 on account of introduction of GST.

Select the correct answer using the codes given below:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true.

Correct Answer: (a) Both (A) and (R) are true and (R) is the correct explanation of (A).

Solution:The fiscal deficit of Indian Government as a percentage of GDP in 2017-18 was higher at 3.5 percent compared to the targeted 3.2 percent in Budget estimates. The main reason for that was the government's finances came under pressure in 2017-18 due to the implementation of the Goods and Services Tax and growth in indirect tax collection was relatively lower on account of introduction of GST. Hence, both (A) and (R) are true, and (R) is the correct explanation of (A).

10. Consider the following statements: [I.A.S (Pre) 2017]

1. Tax revenue as a percent of GDP of India has steadily increased in the last decade.

2. Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer: (d) Neither 1 nor 2

Solution:

Gross Tax Revenue as a percentage of GDP		Fiscal Deficit as a percentage of GDP
Year	%	Year	%
2010-11	10.1	2010-11	4.9
2011-12	10.2	2011-12	5.9
2012-13	10.4	2012-13	4.9
2013-14	10.1	2013-14	4.5
2014-15	10.0	2014-15	4.1
2015-16	10.6	2015-16	3.9
2016-17	11.1	2016-17	3.5
2017-18	11.2	2017-18	3.5
2018-19	11.0	2018-19	3.4
2019-20	10.0	2019-20	4.6
2020-21	10.2	2020-21	9.2
2021-22	11.5	2021-22	6.8
2022-23	11.2	2022-23	6.4
2023-24 (B.E)	11.1	2023-24 (B.E)	5.9
2023-24 (R.E)	11.6	2023-24 (R.E)	5.8
2024-25 (B.E)	11.7	2024-25 (B.E)	5.1

From the data of above tables, it is clear that in the last decade both Tax revenue and Fiscal deficit as a percent of GDP in India have shown ups and downs. Tax revenue has not steadily increased while Fiscal deficit has shown decreasing trend after 2011-12 but in 2019-20 and 2020-21, it was increased. Hence, both of the given statements are incorrect.

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