Union Budget & Fiscal Deficit — Set 18

Correct Answer: B. B. 10-12% of GDP

India's Central Government Tax-to-GDP ratio has generally been around 10-12% of GDP in recent years (combined Centre + States is around 17-18%). This is comparatively low compared to developed economies (where it often exceeds 30%). A higher Tax-GDP ratio indicates greater revenue mobilisation capacity and fiscal space for public expenditure. Improving the Tax-GDP ratio through widening the tax base (GST, direct tax reforms) is a major fiscal objective.

Correct Answer: B. B. Three-year rolling targets for expenditure of major ministries and departments

The Medium-Term Expenditure Framework (MTEF) Statement, mandated under the FRBM Act, provides a three-year rolling expenditure framework for central ministries, linking expenditure projections to fiscal targets. It aims to improve predictability of resource availability for departments, enable multi-year planning of major projects, and anchor expenditure within the medium-term fiscal framework. It enhances efficiency and allocative effectiveness.

Correct Answer: B. B. FRBM Act 2003

The Fiscal Policy Sustainability Statement (FPSS) is one of the budget documents required to be presented along with the Union Budget under the FRBM Act 2003. It sets out the medium-to-long-term sustainability of fiscal policy by analysing future liabilities, contingent liabilities, and fiscal risks. Together with MTFP and MTEF, it forms the medium-term fiscal framework presented with each Union Budget.

Correct Answer: B. B. Link budget allocations to measurable outcomes and results of programmes

Performance Based Budgeting (PBB), which includes the Outcome Budget introduced in 2005-06, links financial allocations to specific, measurable programme outcomes. Rather than merely tracking expenditure, PBB asks whether public funds delivered the intended results (e.g., km of roads built per rupee spent, number of health beneficiaries covered). It promotes accountability, allocative efficiency, and helps identify underperforming programmes.

Correct Answer: C. C. Both Centre and States in specified ratios (e.g., 60:40, 70:30, 90:10)

Centrally Sponsored Schemes (CSS) are jointly funded by the Centre and States in specified cost-sharing ratios, which vary by scheme and category of state. General category states typically contribute 40% and the Centre 60% for most schemes. Special Category States (NE, Himalayan states) have more favourable ratios (e.g., 90:10). This ensures state co-investment and ownership. Examples include PM Gram Sadak Yojana, PMAY, MGNREGS.

Correct Answer: A. A. Schemes funded and implemented entirely by the Central Government through its own agencies

Central Sector Schemes are 100% funded and implemented by the Central Government, typically through its own central agencies or departmental machinery. Unlike Centrally Sponsored Schemes, states do not co-fund them. Examples include PM-Kisan (direct benefit transfer to farmers), National Pension System, Central Government employee schemes, and schemes related to central subjects like atomic energy and space.

Correct Answer: B. B. Real-time tracking of fund flows and utilisation under government schemes

Public Financial Management System (PFMS) is a web-based platform developed by the Controller General of Accounts (CGA) under the Ministry of Finance. It enables real-time tracking of fund flows from Central Government to states, districts, implementing agencies, and ultimate beneficiaries under government schemes. PFMS reduces leakages, improves fund utilisation monitoring, and enables Direct Benefit Transfers (DBT) for subsidy programmes.

Correct Answer: B. B. Small savings instruments like PPF, NSC, post office savings

The National Small Savings Fund (NSSF) is part of the Public Account of India and receives all collections under small savings instruments — Public Provident Fund (PPF), National Savings Certificates (NSC), Senior Citizens Savings Scheme, Kisan Vikas Patra, post office savings accounts and deposits. These funds are used to provide loans to States and are an important non-market borrowing source for financing government deficits.

Correct Answer: B. B. Short-term advances to bridge temporary mismatches between receipts and expenditure

Ways and Means Advances (WMA) are short-term temporary advances provided by RBI to both the Central and State Governments to help bridge temporary gaps between government receipts and expenditure within a financial year. They carry interest and must be repaid within 90 days (for the Centre). WMA replaced the old system of ad hoc Treasury Bills in 1997. They do not constitute fiscal deficit as they are temporary liquidity measures.

Correct Answer: B. B. Debt instruments issued to borrow from the market

Government Securities (G-Secs) are debt instruments (bonds) issued by the Central Government to borrow from financial markets. They are issued at fixed or floating interest rates and have maturities ranging from 91 days (Treasury Bills) to 40+ years (dated securities). G-Secs are considered risk-free as they are sovereign debt. They are a key instrument for financing the fiscal deficit through market borrowings.