Government Budgeting

1.Budget and Its Constitutional Basis

• Annual Financial Statement Under Article 112Importance 4/5UPSC 2024
  What does Article 112 require? Know who causes the statement to be laid, before which Houses, and for which financial year. Does the Constitution itself use the word "budget"? Understand why the Article wants revenue-account spending shown separately from other spending.
• Articles 265 and 266 and Parliament's ApprovalImportance 3/5
  Understand the two ideas behind these Articles: what a tax needs before it can be collected, and what spending needs before it can be made. Which Bill carries Parliament's approval for taxes, and which for spending? Be clear what Article 266 actually deals with.
• Who Prepares the Union BudgetImportance 4/5UPSC 2010, 2015
  Which division, in which department of which ministry, prepares the Union Budget? Remember all three names.
• Budget Estimates, Revised Estimates and ActualsImportance 3/5
  Each budget gives three sets of figures. Which year does each one refer to: budget estimates, revised estimates and actuals? Understand why a large gap between budget estimates and revised estimates is read as a sign of weak fiscal credibility.
• What the Budget Contains Besides EstimatesImportance 3/5UPSC 1998
  Besides estimated receipts and spending, the budget carries other information. Remember what it says about ways of raising revenue, the actual figures of the closing year (and the reasons for any deficit or surplus), and the economic and financial policy for the coming year.
• Allocation, Redistribution and Stabilisation Functions of the BudgetImportance 3/5UPSC 1996
  Know the three functions of the budget and the tool used for each. Under allocation, what are public goods, and why do private markets fail to supply them well? How does public provision differ from public production? How does the budget stabilise demand when it is low and when it is excessive?

2.Budget Procedure

• Presentation of the Budget and the Main Budget DocumentsImportance 3/5UPSC 2020
  On which date is the Union Budget presented, by whom, and in which House first? Is there any discussion on that day? Remember the main documents laid with the Budget Speech, including the statements required under the FRBM Act.
• Budget Reforms of 2017-18Importance 3/5
  From the 2017-18 budget, what changes were made to the date of presentation, to the Railway Budget, and to the plan and non-plan classification? Understand how the change of date helps spending begin on 1 April.
• General Discussion and Scrutiny by Departmentally Related Standing CommitteesImportance 2/5
  Learn the two stages of Budget discussion. What is the general discussion limited to, and in which Houses does it take place? Then understand what the Departmentally Related Standing Committees do while the Houses are adjourned.
• Charged and Voted Expenditure (Article 113)Importance 4/5
  Distinguish charged expenditure from voted expenditure under Article 113. Can Parliament discuss charged items? Can it vote on them? Remember the standard examples of charged expenditure, and how the demands of Union Territories without a legislature are handled.
• Voting on Demands for Grants and the GuillotineImportance 3/5
  Which House votes on Demands for Grants, and how is the time for discussion fixed? What is the guillotine? Does the Rajya Sabha vote on demands? Understand the choices the Lok Sabha has on any one demand, including cut motions (policy cut, economy cut and token cut).
• Supplementary Demands for Grants and Demands for Excess GrantsImportance 3/5
  Compare supplementary demands with demands for excess grants. When does each arise, and when is it passed? Which authority reports excess spending to Parliament, and which committee examines it?
• Appropriation Bill (Article 114)Importance 3/5
  When is the Appropriation Bill introduced, and what authority does Article 114 give through it? Understand why money cannot be taken out of the Consolidated Fund without it.
• Finance Bill and the Provisional Collection of Taxes Act, 2023Importance 3/5
  What does the Finance Bill seek to do, when is it introduced, and when is it taken up for passing? How can some customs or excise duty changes take effect at once under the Provisional Collection of Taxes Act, 2023? When does such a change stop having effect if the Bill has not been enacted?
• Appropriation and Finance Bills as Money Bills: Role of the Rajya SabhaImportance 3/5
  Why are both Bills treated as Money Bills? Understand how far the Rajya Sabha can affect them. Are they deemed passed if the Lok Sabha does not accept the Rajya Sabha's recommendations? Remember the time limit within which the Rajya Sabha must return them.
• How Tax Rates Are Changed Through the BudgetImportance 2/5
  Which tax changes need an amendment of the law through the Finance Act? Compare direct taxes with customs and excise duties, and understand the role of a ceiling rate. How are GST rates changed?

3.Government Accounts

• Consolidated Fund of IndiaImportance 4/5
  What is credited to the Consolidated Fund of India, and what is debited from it? Which receipts other than taxes go into it? Understand the rule for withdrawing money, and why public debt is said to be contracted on the security of this fund.
• Contingency Fund of IndiaImportance 4/5UPSC 2004
  What kind of fund is the Contingency Fund, and at whose disposal is it kept? Which Article provides for it? Understand what it is used for and how it is recouped after Parliament votes. Know its present corpus and which law raised it to that level.
• Public Account of IndiaImportance 4/5UPSC 2004
  Which public money is accounted for in the Public Account? Understand why its receipts and payments need no vote of Parliament, and in what role the Government holds this money. How does the Public Account differ from the Consolidated Fund?
• Funds of States and Union TerritoriesImportance 3/5UPSC 2004
  Do States and Union Territories keep their own funds? Remember which three funds a State has. Under which laws do Union Territories with a legislature hold theirs, and who holds the Contingency Fund of such a Union Territory?

4.Receipts and Expenditure

• Revenue Budget and Capital BudgetImportance 4/5UPSC 2016
  What does each part of the budget contain? Be clear about the test that separates the revenue account from the capital account, and why Article 112 asks for the split. You should be able to compare the two on focus, income and spending.
• Revenue Receipts and Tax RevenueImportance 4/5
  What makes a receipt a revenue receipt? Understand why such receipts are called non-redeemable, and how the Finance Bill's tax proposals affect them. Remember how tax revenue divides into direct and indirect taxes.
• Non-Tax RevenueImportance 3/5
  Understand what non-tax revenue includes, with examples such as interest on loans, dividends and profits of public enterprises (including the RBI's surplus transfer), fees and fines. Is a grant from a foreign country a revenue receipt or a capital receipt?
• Capital ReceiptsImportance 5/5UPSC 2016, 2025
  What is a capital receipt, and how does it differ from a revenue receipt? Understand why borrowing and disinvestment are examples. Learn the other main items, such as recovery of loans, small savings and provident funds. Is interest on a loan given earlier treated in the same way as recovery of that loan?
• Debt-Creating and Non-Debt Creating Capital ReceiptsImportance 4/5UPSC 2025
  Which capital receipts create debt, and which do not? Understand why this split decides what is counted in the fiscal deficit, and what each type means for the Government's future repayments or asset base. Which department of the Finance Ministry deals with disinvestment?
• Revenue Expenditure and Its Main ItemsImportance 5/5UPSC 5 Years
  What makes spending revenue expenditure? Know its main items: interest payments, subsidies, salaries and pensions, defence revenue spending and grants to States. Is defence capital outlay revenue or capital expenditure? Distinguish explicit from implicit subsidies. Why is much of this spending called committed, and why is it hard to cut? Which item is largest at present?
• Capital ExpenditureImportance 4/5UPSC 2016, 2022
  Understand the test that makes spending capital expenditure. Remember what it includes: land, buildings and machinery, shares, and loans and advances to States, Union Territories and public enterprises. Is repayment of a loan capital or revenue spending? Why is a grant to a State for building assets still revenue spending for the Centre?
• Effective Capital ExpenditureImportance 4/5
  How does effective capital expenditure differ from plain capital expenditure? Understand why some grants given to States are treated differently, using the example of assets created under the rural employment guarantee (MGNREGA, now replaced by VB-G RAM G). Know the current figure and how it has moved in recent budgets.
• Main Sources of Receipts and Heads of Spending in the Union BudgetImportance 3/5
  Out of each rupee the Centre receives, which source is the largest? Which items take the biggest shares of each rupee it spends? Know the current ranking and what drives it.

5.Types of Budgets

• Full Budget and Interim BudgetImportance 3/5UPSC 2011
  What is the difference between a full budget and an interim budget? In what situation is an interim budget presented? Does it give estimates for the whole year, for receipts as well as expenditure? What does Parliament actually vote on at that stage? Is it required by the Constitution, or is it a convention?
• Vote on AccountImportance 4/5UPSC 2011
  Why is a vote on account taken, and which Article deals with it? Which side of the budget does it cover? How is the period it covers decided, and what has been the practice in recent election years? How does it differ from an interim budget?
• Balanced, Surplus and Deficit BudgetsImportance 3/5
  How are balanced, surplus and deficit budgets defined? Understand the fiscal stance each one shows. How can cutting revenue expenditure and rationalising subsidies bring a deficit down?
• Zero-Based BudgetingImportance 3/5
  How does zero-based budgeting differ from the usual incremental method? Understand what it aims to achieve in checking whether activities are still relevant and in removing wasteful spending.
• Outcome BudgetImportance 3/5
  Be clear what an outcome budget tries to achieve. Understand how an outlay differs from an output and from an outcome, using the LPG subsidy example of targets for households reached.
• Gender BudgetImportance 4/5
  What is gender budgeting? Understand how it applies at each stage: policy, allocation, monitoring and audit. Remember when the Gender Budget Statement began in India. How are Parts A, B and C of the statement defined, and which part is the most recent addition?

6.Government Deficits

• Revenue DeficitImportance 5/5UPSC 2001, 2025
  How is the revenue deficit worked out? Understand what it says about the Government's saving, and why borrowing to cover it is seen as harmful. What usually happens to capital and welfare spending when a revenue deficit has to be met?
• Fiscal DeficitImportance 5/5UPSC 1999, 2025
  What is the formula for the fiscal deficit, and why does it equal the Government's total borrowing? Understand why borrowing is left out of receipts in this measure. How is it linked to the revenue deficit? Know the sources of financing, the current figure and the trend over the last decade.
• Primary DeficitImportance 5/5UPSC 2001, 2025
  Which interest figure is removed from the fiscal deficit in the Budget's measure, and which one in the "net" version? What does the result show? Understand why a lower primary deficit is seen as healthier.
• Effective Revenue DeficitImportance 4/5
  How is the effective revenue deficit worked out, and what problem led to it? Understand the case of grants to States that create assets owned by the States. What is its status today as an FRBM target?
• Calculating Deficits from Budget FiguresImportance 5/5UPSC 1999, 2001, 2025
  Practise working out the revenue, fiscal and primary deficit from a given set of figures. Are non-debt capital receipts already allowed for in the fiscal deficit, or must they be adjusted again when finding the primary deficit?
• What Deficits Reveal About Fiscal HealthImportance 4/5UPSC 2010, 2017
  What does each deficit measure tell about fiscal health? Why does the share of the revenue deficit in the fiscal deficit matter? Understand the risks of deficits that continue year after year. Which is a flow and which is a stock: a deficit or debt?

7.Fiscal Policy

• Meaning and Objectives of Fiscal PolicyImportance 3/5
  What is fiscal policy, and how does it relate to monetary policy? Learn its main objectives. Are they ranked in a fixed order, or does the focus change with the state of the economy?
• Components of Fiscal PolicyImportance 2/5
  Remember the four components of fiscal policy. Understand what each one deals with.
• Expansionary and Contractionary Fiscal PolicyImportance 5/5UPSC 2010, 2011, 2021
  How do expansionary and contractionary fiscal policy differ in tools, purpose and effect on aggregate demand? What is pump priming? Understand in which situation each is used.
• Counter-Cyclical and Pro-Cyclical Fiscal PolicyImportance 4/5
  How does a counter-cyclical policy behave in a boom and in a recession? How does a pro-cyclical one behave, and what does it do to the business cycle? What did an Economic Survey say about the tendency of India's fiscal stance?
• Fiscal Multiplier and Fiscal Policy in DownturnsImportance 3/5UPSC 2021
  Learn what a fiscal multiplier measures. Why is fiscal policy said to work better in recessions than in expansions? Why do infrastructure spending and crises give larger multipliers?
• Fiscal ConsolidationImportance 4/5UPSC 2015, 2016
  What is fiscal consolidation, and what levers does it use? Understand how it links to the FRBM path of deficit reduction.

8.FRBM Act and Fiscal Rules

• Background and Enactment of the FRBM Act, 2003Importance 4/5
  Why did the fiscal position around the year 2000 lead to a call for a law binding every government? Which committee drafted it, and who chaired it? When was the Act passed, and when did it come into force?
• Objectives of the FRBM ActImportance 3/5
  Remember the main objectives of the Act. Understand what "intergenerational equity" means, and how limiting deficits and borrowing is meant to serve the objectives. Also learn the aims on transparency and medium-term planning.
• Deficit, Debt and Guarantee Targets Under the FRBM ActImportance 5/5UPSC 2006, 2010
  What does the Act target for the fiscal deficit, for general government debt, for Central debt and for fresh guarantees? How did the 2018 amendment change the original targets? What must the Government do if a target is crossed? Know where the Government stands against these targets now.
• N. K. Singh Committee on the FRBM FrameworkImportance 4/5UPSC 2018
  Why was the N. K. Singh Committee set up? Learn its recommendations on the main debt anchor, the deficit path, the escape clause and a fiscal council. Which of these did the 2018 amendment adopt?
• Escape Clause and Buoyancy ClauseImportance 4/5
  On what grounds may the fiscal deficit target be exceeded? What is the limit on such a deviation in a year? What is the buoyancy clause, and when does it require the deficit to be cut further?
• Borrowing from the RBI Under the FRBM ActImportance 3/5UPSC 2010
  What borrowing from the RBI does the Act forbid? Which advances are allowed? In what circumstances may the RBI buy in primary issues of government securities? Can it trade in them in the secondary market?
• Fiscal Policy Statements Under the FRBM ActImportance 4/5UPSC 2020
  Which statements must the Government lay with the budget? Understand what each one covers and the horizon of targets the Act requires. Which statement is laid later, and when? Do recent statements give rolling deficit targets, or a debt path? Know the current name and form of these statements.
• Transparency and Compliance Provisions of the FRBM ActImportance 2/5
  What transparency and review duties does the Act place on the Government? Learn who reviews receipts and expenditure during the year, how often, and where the results go. What role does the CAG have? Whose approval is needed for other deviations?
• Deviation from Targets After COVID-19 and the Path to 2025-26Importance 3/5
  Why were the targets missed after 2020? Understand why the Government chose flexibility over amending the Act. What fiscal deficit goal was set for 2025-26, and was it met?
• Debt-to-GDP Ratio as the Fiscal Anchor from 2026-27Importance 4/5
  What is the Government's new anchor for fiscal policy, and what medium-term target and date go with it? What role is left to the fiscal deficit? Understand why a debt anchor is preferred to a deficit-only target. Has the FRBM Act itself been changed to match?
• Fiscal Rules for StatesImportance 3/5
  What deficit limits do States work under, and which laws set them? Understand how extra borrowing room has been given on conditions such as power-sector reforms, and during COVID-19. What limit has the 16th Finance Commission recommended for 2026-31?
• Fiscal Health Index of StatesImportance 2/5
  Which body publishes the Fiscal Health Index, and which States does it cover? Know the five areas on which States are scored.

9.Public Debt and Deficit Financing

• Meaning and Objectives of Public DebtImportance 3/5
  What is public debt, and how do household savings reach the Government? Why does the Government borrow? Understand its objectives, including the link to monetary operations and its counter-cyclical use.
• Constitutional Provisions on Borrowing: Articles 292 and 293Importance 4/5UPSC 2018
  What do Articles 292 and 293 say about borrowing by the Centre and by States? From where may States borrow? When does a State need the Centre's prior consent? Understand how loans from abroad for States are routed through the Centre.
• Components of the Central Government's LiabilitiesImportance 4/5
  Into what parts do the Centre's total liabilities divide? Which of them together make up public debt? Be clear about the difference between public debt and total liabilities.
• Internal Debt and Its InstrumentsImportance 4/5UPSC 2001, 2020, 2022
  Which instruments make up internal debt? Learn the maturities of Treasury Bills and how market borrowing is raised through auctions. What are special securities issued to the RBI? Why does mostly fixed-rate debt protect the Government from changes in interest rates?
• External Debt of the GovernmentImportance 3/5
  From whom does the Government borrow abroad? Distinguish multilateral from bilateral lenders. How are foreign investors' holdings of government securities treated in the Budget's liabilities, and how in India's external debt statistics? What is the exchange-rate risk on external debt?
• Financial and Non-Financial DebtImportance 3/5UPSC 2020
  What is meant by non-financial debt? Judge whether housing loans of households, credit card dues and Treasury Bills fall under it, and why.
• Trends in Government Debt in IndiaImportance 3/5UPSC 2018
  What has been the broad direction of Central, State and general government debt since 2014-15? Understand why debt jumped during COVID-19 and how it is projected to move. Know the current level of Central and general government debt.
• Public Debt Management and the Public Debt Management CellImportance 3/5
  Who manages public debt at present? Why was the Public Debt Management Cell set up, and what does it do? Understand why some argue that debt management should be separated from the RBI.
• Are Fiscal Deficits Inflationary?Importance 3/5
  Under what conditions does a fiscal deficit push up prices? Think about what happens when resources are fully used, and what happens when they lie idle.
• Crowding Out and Crowding InImportance 4/5UPSC 2002, 2026
  How does government borrowing crowd out private investment, and when does that happen? What is crowding in, and in which situation does it occur? What argument does the Economic Survey give about crowding out in India?
• Burden of Debt and Ricardian EquivalenceImportance 3/5
  How can public debt burden future generations? Remember the idea of Ricardian equivalence, and what it says about borrowing compared with taxation.
• When Is a Fiscal Deficit Justified?Importance 2/5
  Why did Keynes and others support small deficits in a crisis? Understand the condition that makes borrowing worthwhile, comparing the return on the investment with the cost of borrowing. Why is that hard to judge for social spending?
• Debt Sustainability and the Interest Rate–Growth DifferentialImportance 4/5
  What is the interest rate–growth differential, and why does a negative one help debt sustainability? In India, which way does the link run between growth and the debt-to-GDP ratio? Can debt rise even when there is a primary surplus?
• Deficit Financing and Ways of Financing a DeficitImportance 3/5UPSC 2013
  What are the ways in which a deficit can be financed? Understand how deficit financing in general differs from monetisation, which is only one of its routes.
• Monetisation of Deficit and How It EndedImportance 4/5
  How was the deficit monetised through ad hoc Treasury Bills, and why is this called a primary-market transaction? When and how did the practice end, and what replaced it? What does the FRBM Act say about it?
• Effects of Monetising the DeficitImportance 4/5UPSC 2013, 2021
  Why is monetising the deficit called the most inflationary way of financing it? Understand its effects on demand, the rupee, government debt, credit ratings and the RBI's control of monetary policy. In what situation may direct monetisation be preferred to borrowing from banks?
• Fiscal Dominance and Monetary–Fiscal CoordinationImportance 3/5
  What is fiscal dominance, and how can the Government's borrowing needs limit monetary policy? Understand how heavy borrowing affects yields on government securities. Why do the Government and the RBI still need to coordinate?

10.Fiscal Council

• What a Fiscal Council Is and DoesImportance 3/5
  What is a fiscal council, and how does it differ from a government department? What would it do on forecasts, on deviations from fiscal rules, and on budget proposals?
• Arguments for and Against a Fiscal Council in IndiaImportance 3/5
  What weaknesses in India's budgeting could a fiscal council address? Understand the arguments in its favour, including "comply or explain" and the limits of CAG audit. What are the arguments against it?
• Recommendations for a Fiscal Council in IndiaImportance 2/5
  Which bodies have recommended a fiscal council for India? Does India have one today?

11.Contingent Liabilities and Off-Budget Borrowing

• Off-Budget Borrowing and Extra-Budgetary ResourcesImportance 4/5
  What is off-budget borrowing, and why does it make the deficit look smaller than it is? Understand the example of the Food Corporation of India borrowing from the National Small Savings Fund. What steps on disclosure, on-budget treatment and States' off-budget borrowing have followed?
• Contingent Liabilities and Government GuaranteesImportance 3/5
  What is a contingent liability, and how do guarantees create one? Distinguish explicit from implicit contingent liabilities. What limit does the FRBM Act place on fresh guarantees, and what happens when a guarantee is invoked?
• Oil Bonds, Fertiliser Bonds and Special SecuritiesImportance 2/5
  What were oil bonds and fertiliser bonds, and why were they issued? Understand why issuing bonds instead of paying a cash subsidy keeps the spending out of that year's deficit. Where do such bonds appear among the Government's liabilities?

1. 1.

   Consider the following items in the Union Budget:
   1. Recovery of loans previously granted by the Central Government
   2. Interest received on loans given by the Central Government
   3. Net receipts from the sale of shares in public sector undertakings (disinvestment)
   4. Cash grants-in-aid from foreign countries
   How many of the above are classified as capital receipts?

   1. AOnly one
   2. BOnly two
   3. COnly three
   4. DAll four
2. 2.

   In a Union Budget, total expenditure is ₹70,000 crore, revenue receipts are ₹45,000 crore, non-debt creating capital receipts are ₹5,000 crore and interest payments are ₹8,000 crore. What is the gross primary deficit?

   1. A₹7,000 crore
   2. B₹17,000 crore
   3. C₹20,000 crore
   4. D₹12,000 crore
3. 3.

   Consider the following statements:
   Statement-I: A revenue deficit is considered undesirable for the Government's finances.
   Statement-II: A revenue deficit means that the Government's current expenses exceed its current revenues, so it must use up the savings of other sectors to finance its consumption expenditure.
   Which one of the following is correct in respect of the above statements?

   1. ABoth Statement-I and Statement-II are correct and Statement-II explains Statement-I
   2. BBoth Statement-I and Statement-II are correct and Statement-II does not explain Statement-I
   3. CStatement-I is correct but Statement-II is incorrect
   4. DStatement-I is incorrect but Statement-II is correct
4. 4.

   Consider the following statements about the fiscal deficit:
   1. It is the difference between total expenditure and total receipts, with borrowings counted as part of receipts.
   2. Its financing consists of net borrowing at home and borrowing from abroad, but never borrowing from the RBI.
   3. A large share of revenue deficit in the fiscal deficit shows that most of the borrowing is being used for investment rather than consumption.
   How many of the above statements are correct?

   1. AOnly one
   2. BOnly two
   3. CAll three
   4. DNone
5. 5.

   Match List I with List II:

   List I (Term)	List II (Meaning)
   A. Revenue deficit	1. Capital expenditure plus grants given to States for creation of capital assets
   B. Effective revenue deficit	2. Revenue expenditure minus revenue receipts
   C. Fiscal deficit	3. Total expenditure minus total receipts except borrowing
   D. Effective capital expenditure	4. Revenue deficit minus grants given to States for creation of capital assets

   Select the correct answer using the code given below:

   1. AA-4, B-2, C-3, D-1
   2. BA-2, B-4, C-1, D-3
   3. CA-3, B-4, C-2, D-1
   4. DA-2, B-4, C-3, D-1
6. 6.

   With reference to the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, consider the following statements:
   1. The Central Government shall not give additional guarantees on the security of the Consolidated Fund of India in excess of 0.5 per cent of GDP in any financial year.
   2. The Act's target for the Central Government debt is 60 per cent of GDP by 2024-25.
   3. The fiscal deficit target may be exceeded on grounds such as national security, act of war and national calamity, but any such deviation shall not exceed 0.5 per cent of GDP in a year.
   Which of the statements given above is/are correct?

   1. A1 and 2 only
   2. B2 and 3 only
   3. C1 and 3 only
   4. D1, 2 and 3
7. 7.

   Consider the following pairs:

   Article of the Constitution	Provision
   1. Article 112	Annual Financial Statement to be laid before both Houses of Parliament
   2. Article 265	No tax to be levied or collected except by authority of law
   3. Article 114	Finance Bill giving effect to the Government's taxation proposals

   Which of the pairs given above is/are correctly matched?

   1. A1 and 2 only
   2. B2 and 3 only
   3. C1 and 3 only
   4. D1, 2 and 3
8. 8.

   With reference to the estimates of expenditure in the Union Budget, consider the following statements:
   1. Expenditure charged upon the Consolidated Fund of India can be discussed in either House of Parliament but is not submitted to the vote of Parliament.
   2. The Lok Sabha has the power to assent to a demand for grant subject to a reduction of the amount specified in it.
   3. The Rajya Sabha votes on the Demands for Grants of the ministries along with the Lok Sabha.
   Which of the statements given above is/are correct?

   1. A1 and 2 only
   2. B2 and 3 only
   3. C1 and 3 only
   4. D1, 2 and 3
9. 9.

   Match List I with List II:

   List I (Account of the Government of India)	List II (Feature)
   A. Consolidated Fund of India	1. Its receipts and disbursements are not subject to the vote of Parliament
   B. Contingency Fund of India	2. Meets unforeseen expenses pending Parliament's authorisation; the money spent is recouped from the Consolidated Fund after Parliament votes
   C. Public Account of India	3. Receives taxes and loans raised by the Government; no amount can be withdrawn without Parliament's authorisation

   Select the correct answer using the code given below:

   1. AA-1, B-2, C-3
   2. BA-2, B-3, C-1
   3. CA-3, B-1, C-2
   4. DA-3, B-2, C-1
10. 10.

    Consider the following items of the Union Budget:
    1. Loans and advances by the Centre to State Governments
    2. Interest payments on government debt
    3. Subsidies
    4. Salaries and pensions of government employees
    How many of the above are capital expenditure of the Central Government?

    1. AOnly one
    2. BOnly two
    3. COnly three
    4. DAll four
11. 11.

    With reference to the interim budget and the vote on account, consider the following statements:
    1. A vote on account deals only with the expenditure side of the Government's budget.
    2. The Interim Budget for 2024-25 gave Budget Estimates for the full year 2024-25, while the vote on account covered only part of the year.
    3. Presenting an interim budget in an election year is a constitutional obligation.
    Which of the statements given above is/are correct?

    1. A1 and 2 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2 and 3
12. 12.

    Consider the following statements about Gender Budgeting in India:
    1. The Gender Budget Statement was first introduced in the Indian Budget in 2005-06.
    2. Part A of the Gender Budget comprises schemes with 100 per cent allocation for women.
    3. Part B comprises schemes that allocate at least 30 per cent of their funds for women.
    How many of the above statements are correct?

    1. AOnly one
    2. BOnly two
    3. CAll three
    4. DNone
13. 13.

    With reference to fiscal policy and the business cycle, consider the following statements:
    1. A counter-cyclical fiscal policy increases government expenditure and raises tax levels during a recession.
    2. A pro-cyclical fiscal policy goes in line with the current mood of the business cycle and thereby amplifies it.
    3. The Economic Survey 2016-17 acknowledged that India's fiscal stance has an in-built bias toward higher deficits because spending rises pro-cyclically during growth surges.
    Which of the statements given above is/are correct?

    1. A1 and 2 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2 and 3
14. 14.

    Under the FRBM framework, if the real output growth of a quarter rises at least three percentage points above its average of the previous four quarters, the Central Government is required to:

    1. Araise capital expenditure by at least one-quarter per cent of GDP
    2. Breduce the fiscal deficit by at least one-quarter per cent of GDP in that year
    3. Creduce the fiscal deficit by at least one per cent of GDP in that year
    4. Dtreat the fiscal deficit target as exceeded by one-quarter per cent of GDP
15. 15.

    Consider the following statements:
    Statement-I: Government borrowing can crowd out private investment when the economy's resources are fully utilised.
    Statement-II: Crowding in occurs when debt-financed government spending raises private investment, and it occurs mainly in a boom when all economic resources are fully utilised.
    Which one of the following is correct in respect of the above statements?

    1. ABoth Statement-I and Statement-II are correct and Statement-II explains Statement-I
    2. BBoth Statement-I and Statement-II are correct and Statement-II does not explain Statement-I
    3. CStatement-I is correct but Statement-II is incorrect
    4. DStatement-I is incorrect but Statement-II is correct
16. 16.

    Consider the following statements, based on the findings of earlier Economic Surveys on debt sustainability in India:
    1. Debt sustainability depends on the difference between the interest rate and the growth rate in the economy.
    2. Since the interest rate paid by the Government on its debt has been less than India's growth rate, growth leads to debt sustainability but not necessarily vice versa.
    3. In India, a higher debt-to-GDP ratio has caused higher GDP growth, but not vice versa.
    4. When the interest rate–growth differential is negative, a fiscal policy that gives an impetus to growth leads to a higher debt-to-GDP ratio.
    How many of the above statements are correct?

    1. AOnly one
    2. BOnly two
    3. COnly three
    4. DAll four
17. 17.

    Consider the following statements regarding the monetisation of the Centre's fiscal deficit in India:
    1. Before 1997, the Government financed its deficit directly from the RBI by issuing ad hoc Treasury Bills to it.
    2. Such direct monetisation was a secondary-market transaction between the Government and the RBI.
    3. The FRBM Act, 2003 prohibits direct monetisation of the deficit but allows it in exceptional circumstances.
    Which of the statements given above is/are correct?

    1. A1 and 2 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2 and 3
18. 18.

    As of the Union Budget 2026-27 (February 2026), consider the following pairs:

    Item	Description
    1. Effective capital expenditure	Introduced from the Union Budget 2017-18
    2. A Centre's grant to a State for creating assets owned by the State	Booked as revenue expenditure in the Centre's accounts
    3. Public capex proposed for 2026-27	₹12.2 lakh crore

    Which of the pairs given above is/are correctly matched?

    1. A1 and 2 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2 and 3
19. 19.

    As of February 2026, which one of the following is the Government of India's medium-term fiscal target under its new fiscal prudence path of debt consolidation?

    1. AAn annual fiscal deficit of 3 per cent of GDP by March 2028
    2. BGeneral government debt of 60 per cent of GDP by March 2027
    3. CCentral Government debt of 50±1 per cent of GDP by March 2031
    4. DElimination of the revenue deficit by March 2030
20. 20.

    With reference to the N. K. Singh Committee on the FRBM framework, consider the following statements:
    1. It recommended a debt-to-GDP ratio of 60 per cent, with 40 per cent for the Centre and 20 per cent for the States.
    2. It proposed an autonomous Fiscal Council consisting of a Chairperson and two members appointed by the Centre.
    3. Several key elements of its recommendations were incorporated into the existing FRBM framework through the Finance Act, 2018.
    Which of the statements given above is/are correct?

    1. A1 and 2 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2 and 3

1. 1.

   UPSC 2024

   With reference to Union Budget, consider the following statements :
   1. The Union Finance Minister on behalf of the Prime Minister lays the Annual Financial Statement before both the Houses of Parliament.
   2. At the Union level, no demand for a grant can be made except on the recommendation of the President of India.
   Which of the statements given above is/are correct ?

   1. A1 only
   2. B2 only
   3. CBoth 1 and 2
   4. DNeither 1 nor 2
2. 2.

   UPSC 2015

   With reference to the Union Government, consider the following statements :
   1. The Department of Revenue is responsible for the preparation of Union Budget that is presented to the Parliament.
   2. No amount can be withdrawn from the Consolidated Fund of India without the authorization from the Parliament of India.
   3. All the disbursements made from Public Account also need the authorization from the Parliament of India.
   Which of the statements given above is/are correct?

   1. A1 and 2 only
   2. B2 and 3 only
   3. C2 only
   4. D1, 2 and 3
3. 3.

   UPSC 2026

   Which one of the following best describes the ‘Crowding Out Effect’ in the context of fiscal policy ?

   1. AA situation where private investment increases due to increased Government spending
   2. BA situation where Government borrowing leads to higher interest rates, which reduces private investment
   3. CA situation where an increase in taxes leads to increased private sector investment
   4. DA situation where Government spending has no impact on aggregate demand
4. 4.

   UPSC 2025

   Consider the following statements :
   I. Capital receipts create a liability or cause a reduction in the assets of the Government.
   II. Borrowings and disinvestment are capital receipts.
   III. Interest received on loans creates a liability of the Government.
   Which of the statements given above are correct?

   1. AI and II only
   2. BII and III only
   3. CI and III only
   4. DI, II and III
5. 5.

   UPSC 2025

   Suppose the revenue expenditure is ₹ 80,000 crores and the revenue receipts of the Government are ₹ 60,000 crores. The Government budget also shows borrowings of ₹ 10,000 crores and interest payments of ₹ 6,000 crores. Which of the following statements are correct?
   I. Revenue deficit is ₹ 20,000 crores.
   II. Fiscal deficit is ₹ 10,000 crores.
   III. Primary deficit is ₹ 4,000 crores.
   Select the correct answer using the code given below.

   1. AI and II only
   2. BII and III only
   3. CI and III only
   4. DI, II and III
6. 6.

   UPSC 2025

   A country's fiscal deficit stands at ₹ 50,000 crores. It is receiving ₹ 10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹ 1,500 crores. What is the gross primary deficit?

   1. A₹ 48,500 crores
   2. B₹ 51,500 crores
   3. C₹ 58,500 crores
   4. DNone of the above
7. 7.

   UPSC 2022

   With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct ?
   1. Acquiring new technology is capital expenditure.
   2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
   Select the correct answer using the code given below :

   1. A1 only
   2. B2 only
   3. CBoth 1 and 2
   4. DNeither 1 nor 2
8. 8.

   UPSC 2022

   With reference to the Indian economy, consider the following statements :
   1. A share of the household financial savings goes towards government borrowings.
   2. Dated securities issued at market-related rates in auctions form a large component of internal debt.
   Which of the above statements is/are correct ?

   1. A1 only
   2. B2 only
   3. CBoth 1 and 2
   4. DNeither 1 nor 2
9. 9.

   UPSC 2021

   Which among the following steps is most likely to be taken at the time of an economic recession?

   1. ACut in tax rates accompanied by increase in interest rate
   2. BIncrease in expenditure on public projects
   3. CIncrease in tax rates accompanied by reduction of interest rate
   4. DReduction of expenditure on public projects
10. 10.

    UPSC 2021

    Which one of the following is likely to be the most inflationary in its effects?

    1. ARepayment of public debt
    2. BBorrowing from the public to finance a budget deficit
    3. CBorrowing from the banks to finance a budget deficit
    4. DCreation of new money to finance a budget deficit
11. 11.

    UPSC 2020

    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

    1. ALong standing parliamentary convention
    2. BArticle 112 and Article 110(1) of the Constitution of India
    3. CArticle 113 of the Constitution of India
    4. DProvisions of the Fiscal Responsibility and Budget Management Act, 2003
12. 12.

    UPSC 2020

    In the context of the Indian economy, non-financial debt includes which of the following ?
    1. Housing loans owed by households
    2. Amounts outstanding on credit cards
    3. Treasury bills
    Select the correct answer using the code given below :

    1. A1 only
    2. B1 and 2 only
    3. C3 only
    4. D1, 2 and 3
13. 13.

    UPSC 2018

    Consider the following statements :
    1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
    2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
    3. As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter.
    Which of the statements given above is/are correct ?

    1. A1 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2 and 3
14. 14.

    UPSC 2017

    Consider the following statements :
    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 ?

    1. A1 only
    2. B2 only
    3. CBoth 1 and 2
    4. DNeither 1 nor 2
15. 15.

    UPSC 2016

    There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?
    1. Reducing revenue expenditure
    2. Introducing new welfare schemes
    3. Rationalizing subsidies
    4. Reducing import duty
    Select the correct answer using the code given below.

    1. A1 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2, 3 and 4
16. 16.

    UPSC 2016

    Which of the following is/are included in the capital budget of the Government of India?
    1. Expenditure on acquisition of assets like roads, buildings, machinery, etc.
    2. Loans received from foreign governments
    3. Loans and advances granted to the States and Union Territories
    Select the correct answer using the code given below.

    1. A1 only
    2. B2 and 3 only
    3. C1 and 3 only
    4. D1, 2 and 3
17. 17.

    UPSC 2015

    There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?
    1. Reducing revenue expenditure
    2. Introducing new welfare schemes
    3. Rationalizing subsidies
    4. Expanding industries
    Select the correct answer using the code given below.

    1. A1 and 3 only
    2. B2 and 3 only
    3. C1 only
    4. D1, 2, 3 and 4
18. 18.

    UPSC 2014

    With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure?
    1. Defence expenditure
    2. Interest payments
    3. Salaries and pensions
    4. Subsidies
    Select the correct answer using the code given below.

    1. A1 only
    2. B2 and 3 only
    3. C1, 2, 3 and 4
    4. DNone
19. 19.

    UPSC 2013

    In India, deficit financing is used for raising resources for

    1. Aeconomic development
    2. Bredemption of public debt
    3. Cadjusting the balance of payments
    4. Dreducing the foreign debt
20. 20.

    UPSC 2013

    Which one of the following is likely to be the most inflationary in its effect?

    1. ARepayment of public debt
    2. BBorrowing from the public to finance a budget deficit
    3. CBorrowing from banks to finance a budget deficit
    4. DCreating new money to finance a budget deficit
21. 21.

    UPSC 2011

    Which one of the following statements appropriately describes the “fiscal stimulus”?

    1. AIt is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth
    2. BIt is an intense affirmative action of the Government to boost economic activity in the country
    3. CIt is Government’s intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation
    4. DIt is an extreme affirmative action by the Government to pursue its policy of financial inclusion
22. 22.

    UPSC 2011

    What is the difference between "vote-on-account" and "interim budget"?
    1. The provision of a "vote-on-account" is used by a regular Government, while an "interim budget" is a provision used by a caretaker Government.
    2. A "vote-on-account" only deals with the expenditure in Government's budget, while an "interim budget" includes both expenditure and receipts.
    Which of the statements given above is/are correct?

    1. A1 only
    2. B2 only
    3. CBoth 1 and 2
    4. DNeither 1 nor 2
23. 23.

    UPSC 2010

    Which one of the following was NOT stipulated in the Fiscal Responsibility and Budget Management Act, 2003?

    1. AElimination of revenue deficit by the end of the fiscal year 2007-08
    2. BNon-borrowing by the Central Government from Reserve Bank of India except under certain circumstances
    3. CElimination of primary deficit by the end of the fiscal year 2008-09
    4. DFixing government guarantees in any financial year as a percentage of GDP
24. 24.

    UPSC 2010

    In the context of governance, consider the following :
    1. Encouraging Foreign Direct Investment inflows
    2. Privatization of higher educational Institutions
    3. Down-sizing of bureaucracy
    4. Selling/off-loading the shares of Public Sector Undertakings
    Which of the above can be used as measures to control the fiscal deficit in India ?

    1. A1, 2 and 3
    2. B2, 3 and 4
    3. C1, 2 and 4
    4. D3 and 4 only
25. 25.

    UPSC 2010

    Which one of the following is responsible for the preparation and presentation of Union Budget to the Parliament?

    1. ADepartment of Revenue
    2. BDepartment of Economic Affairs
    3. CDepartment of Financial Services
    4. DDepartment of Expenditure
26. 26.

    UPSC 2010

    Consider the following actions by the Government:
    1. Cutting the tax rates
    2. Increasing the government spending
    3. Abolishing the subsidies
    In the context of economic recession, which of the above actions can be considered a part of the "fiscal stimulus" package?

    1. A1 and 2 only
    2. B2 only
    3. C1 and 3 only
    4. D1, 2 and 3
27. 27.

    UPSC 2006

    Which one of the following statements is correct? Fiscal Responsibility and Budget Management Act (FRBMA) concerns

    1. Afiscal deficit only
    2. Brevenue deficit only
    3. Cboth fiscal and revenue deficit
    4. Dneither fiscal deficit nor revenue deficit
28. 28.

    UPSC 2004

    With reference to Indian Public Finance, consider the following statements:
    1. Disbursements from Public Accounts of India are subject to the Vote of Parliament.
    2. The Indian Constitution provides for the establishment of a Consolidated Fund, a Public Account and a Contingency Fund for each State.
    3. Appropriations and disbursements under the Railway Budget are subject to the same form of Parliamentary control as other appropriations and disbursements.
    Which of these statements given above are correct?

    1. A1 and 2
    2. B2 and 3
    3. C1 and 3
    4. D1, 2 and 3
29. 29.

    UPSC 2002

    With reference to the Indian Public Finance consider the following statements:
    1. External liabilities reported in Union Budget are based on historical exchange rates.
    2. The continued high borrowing has kept the real interest rates high in the economy.
    3. The upward trend in the ratio of Fiscal Deficit to GDP in recent years has an adverse effect to private investments.
    4. Interest payments is the single largest component of the non-plan revenue expenditure of the Union Government.
    Which of these statements are correct?

    1. A1, 2 and 3
    2. B1 and 4
    3. C2, 3 and 4
    4. D1, 2, 3 and 4
30. 30.

    UPSC 2001

    Consider the following:
    I. Market borrowing
    II. Treasury bills
    III. Special securities issued to RBI
    Which of these is/are component(s) of internal debt?

    1. AI only
    2. BI and II
    3. CII only
    4. DI, II and III
31. 31.

    UPSC 2001

    Match List I with List II and select the correct answer using the codes given below the Lists:
    List I (Term)
    I. Fiscal deficit
    II. Budget deficit
    III. Revenue deficit
    IV. Primary deficit
    List II (Explanation) A) Excess of Total Expenditure over Total Receipts
    B) Excess of Revenue Expenditure over Revenue Receipts
    C) Excess of Total Expenditure over Total Receipts less borrowings
    D) Excess of Total Expenditure over Total Receipts less borrowings and Interest Payments

    1. AI-C, II-A, III-B, IV-D
    2. BI-D, II-C, III-B, IV-A
    3. CI-A, II-C, III-B, IV-D
    4. DI-C, II-A, III-D, IV-B
32. 32.

    UPSC 1999

    Assertion (A): Fiscal deficit is greater than budgetary deficit.
    Reason (R): Fiscal deficit is the borrowings from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.

    1. ABoth A and R are true, and R is the correct explanation of A
    2. BBoth A and R are true, but R is not a correct explanation of A
    3. CA is true, but R is false
    4. DA is false, but R is true
33. 33.

    UPSC 1998

    Economic Survey in India is published officially, every year by the

    1. AReserve Bank of India
    2. BPlanning Commission of India
    3. CMinistry of Finance, Government of India
    4. DMinistry of Industries, Government of India
34. 34.

    UPSC 1997

    Which of the following come under Non-plan expenditure?
    I. Subsidies
    II. Interest payments
    III. Defence expenditure
    IV. Maintenance expenditure for the infrastructure created in the previous plans
    Choose the correct answer using the codes given below:
    Codes:

    1. AI and II
    2. BI and III
    3. CII and IV
    4. DI, II, III and IV
35. 35.

    UPSC 1996

    The following Table shows the percentage distribution of revenue expenditure of Government of India in 1989-90 and 1994-95:
    
    Head | 1989-90 | 1994-95
    Defence | 15.1 | 13.6
    Interest Payments | 27.7 | 38.7
    Subsidies | 16.3 | 8.0
    Grants to States/UTs | 13.6 | 16.7
    Other | 27.4 | 23.0
    
    Based on this table, it can be said that the Indian economy is in poor shape because the Central Government continues to be under pressure to

    1. Areduce expenditure of defence
    2. Bspend more and more on interest payments
    3. Creduce expenditure on subsidies
    4. Dspend more and more as grants-in-aid to State Governments/Union Territories
36. 36.

    UPSC 1995

    Which of the following are among the non-plan expenditures of the Government of India?
    I. Defence expenditure
    II. Subsidies
    III. All expenditures linked with the previous plan periods
    IV. Interest payment
    Choose the correct answer from the codes given below:

    1. AI and II
    2. BI and III
    3. CII and IV
    4. DI, II, III and IV
37. 37.

    UPSC 1996

    A redistribution of income in a country can be best brought about through

    1. Aprogressive taxation combined with progressive expenditure
    2. Bprogressive taxation combined with regressive expenditure
    3. Cregressive taxation combined with regressive expenditure
    4. Dregressive taxation combined with progressive expenditure