Fiscal Policy, Budget, India’s Debt GK MCQs With Answer & Explanation in English explores key concepts and facts about India’s fiscal framework, including government policies on taxation, spending, budgeting, and national debt management. This article provides multiple-choice questions with detailed answers and explanations to help learners grasp the intricacies of fiscal policy and its impact on the economy.
Whether you’re preparing for competitive exams or enhancing your general knowledge, this comprehensive guide will provide valuable insights.
1. A statement of estimated receipts and expenditures called the annual Financial Statement (Budget) has to be placed before the parliament for each financial year. The above provision has been enshrined in which among the following articles of the Constitution of India?
- Article 110
- Article 111
- Article 112
- Article 113
Show Answer
Answer: Article 112
Article 112 of the Indian Constitution mandates that the President of India shall cause the “Annual Financial Statement” or the Budget to be laid before both houses of Parliament. This budget provides a comprehensive overview of the estimated receipts and expenditures of the Government of India for the upcoming financial year. It serves as a critical tool for financial planning, allocation of resources, and governance.
2. In which year did “Zero Based Budgeting” start in India?
- 1960
- 1983
- 1991
- 2000
Show Answer
Answer: 1983
Zero-Based Budgeting was first implemented in India in 1983 within the Department of Science and Technology. This budgeting approach, developed by Peter Phyrr, gained prominence for its effectiveness in resource allocation. Zero-Based Budgeting starts from a “zero base,” requiring each department to justify its budget needs from scratch, rather than simply making incremental changes to previous budgets. It helps ensure efficient allocation of resources based on current needs and priorities.
3. Which among the following definitions is nearest to Gross Budgetary Support?
- Value of gross revenue receipts by the government
- Value of total plan expenditure
- Fraction of total expenditure of the government on different Central sector plans
- Fraction of total expenditure of the government on different Central
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Answer: Fraction of total expenditure of the government on different Central sector plans
Gross Budgetary Support refers to a portion of the total government expenditure allocated to various Central sector plans. It does not include allocations for state-specific plans. This support is vital for funding developmental initiatives at the central level.
4. Which among the following is a correct definition of fiscal deficit?
- The gap between projected or estimated GDP and actual GDP
- The total value of currency notes issued and currency actual in circulation
- The gap between actual borrowings of the government of India and expected expenditures as per budget provisions
- Excess of Govt.’s disbursement comprising current and capital expenditures over its current receipts
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Answer: Excess of Govt.’s disbursement comprising current and capital expenditures over its current receipts
Fiscal deficit is a critical indicator of a government’s financial health, representing the excess of government’s disbursements, including both current and capital expenditures, over its current receipts. It demonstrates the extent to which the government needs to borrow to meet its expenditure commitments and can provide insights into a country’s economic stability.
5. In the context of the Budget, which among the following is not a Non-Plan Expenditure?
- Revenue and Capital Expenditure on interest payments
- Defense Expenditure
- Grants to State governments & Union territories
- Central Assistance to States and Union Territories
Show Answer
Answer: Central Assistance to States and Union Territories
Contrary to the statement, Central Assistance to States and Union Territories is considered a component of Plan Expenditure, not Non-Plan Expenditure. Non-Plan Expenditure primarily includes recurring costs such as interest payments, defense expenses, and general administrative expenses.
6. Deficit financing is a common practice in many countries in the world today. Which among the following is an incorrect statement regarding Deficit Financing?
- Deficit Financing was popularised by J. M. Keynes
- Deficit Financing generates employment to some extent
- Deficit Financing helps in curbing the bad effects of Depression
- All are correct
Show Answer
Answer: All are correct
All the statements are correct. Deficit Financing was popularised by economist J. M. Keynes. It can generate employment and stimulate economic growth during times of depression or economic slowdown.
7. The government has the responsibility to ensure the availability of which among the following to all consumers regardless of their ability to pay the price?
- Giffen Goods
- Supplementary Goods
- Merit Goods
- Complementary Goods
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Answer: Merit Goods
Merit Goods are those goods that the government ensures are available to all consumers, regardless of their ability to pay, because they are considered beneficial for society. Examples include education, healthcare, and public parks.
8. Via which of the following does the Ministry of Finance review every quarter the trends in Receipts and Expenditure in relation to the Budget and place it before both Houses of Parliament?
- Constitution of India
- Fiscal Responsibility and Budget Management Act 2003
- Finance Acts of every year
- Order of the President of India
Show Answer
Answer: Fiscal Responsibility and Budget Management Act 2003
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 requires the Ministry of Finance to review every quarter the trends in Receipts and Expenditure in relation to the Budget and place it before both Houses of Parliament. This is done through the Mid-Year Review and Macro-Economic backdrop statements.
9. Which among the following denotes the Primary Deficit?
- Revenue Expenditure – Revenue Receipts
- Sum of the net increase in holdings of treasury bills of the RBI and its contributions to the market borrowing of the government.
- Budgetary Deficit + Govt. market borrowings and liabilities
- Fiscal Deficit – Interest Payments
Show Answer
Answer: Revenue Expenditure – Revenue Receipts
The Primary Deficit is calculated by deducting interest payments from the fiscal deficit. It reflects the real financial position of the government as it excludes the interest burden from past loans, focusing on the core financial operations.
10. What is the impact on the “Social overhead capital requirements” of an economy if the population increases?
- Social overhead capital requirements fall
- Social overhead capital requirements remain unchanged
- Social overhead capital requirements increase
- Social overhead capital requirements fall drastically
Show Answer
Answer: Social overhead capital requirements increase
As the population increases, an economy’s demand for social overhead capital, such as infrastructure and public services, also rises. This is due to the need to cater to the increased requirements and welfare of a growing population.
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