Union Budget & Fiscal Deficit — Set 2

Correct Answer: C. C. 2003

The FRBM Act was enacted in 2003 and came into force in July 2004. It was introduced to institutionalise fiscal discipline, ensure intergenerational equity, and achieve long-term macroeconomic stability. The Act mandated reducing fiscal deficit, revenue deficit, and eliminating revenue deficit through a phased glide path. It was a landmark fiscal reform in India.

Correct Answer: C. C. Revenue Deficit

The FRBM Act 2003 mandated the complete elimination of revenue deficit and a reduction of fiscal deficit to 3% of GDP by 2008-09. The rationale was that revenue deficit represents dissaving by the government. The targets were suspended during 2008-09 due to the global financial crisis and fiscal stimulus measures. The FRBM targets have been revised multiple times since.

Correct Answer: C. C. 2016

The NK Singh Committee on FRBM Review was constituted by the Government of India in May 2016, under the chairmanship of NK Singh (former Revenue Secretary and IAS officer). The committee submitted its report in January 2017, recommending a revised fiscal framework for India including a Fiscal Council and debt ceiling.

Correct Answer: C. C. 2.5% of GDP by 2022-23 with escape clause

The NK Singh Committee (2017) recommended reducing fiscal deficit to 2.5% of GDP by 2022-23 (from 3%), and reducing debt-to-GDP ratio to 60% by 2022-23. It also recommended an 'escape clause' allowing a deviation of up to 0.5% from the target in exceptional circumstances such as national calamity, security emergencies, or severe economic downturns.

Correct Answer: C. C. Independent Fiscal Council

The NK Singh Committee recommended establishing an independent Fiscal Council as an autonomous body to advise the government on fiscal policy, assess macroeconomic forecasts, and monitor FRBM compliance. The Fiscal Council would provide independent assessments and enhance fiscal transparency. This recommendation has not yet been fully implemented.

Correct Answer: B. B. Union Budget documents

The Medium Term Fiscal Policy (MTFP) Statement is a mandatory document presented along with the Union Budget under the FRBM Act. It sets out a three-year rolling fiscal framework with targets for revenue deficit and fiscal deficit as a percentage of GDP. It provides the medium-term fiscal outlook and assesses sustainability of policies.

Correct Answer: B. B. Article 266

The Consolidated Fund of India is governed by Article 266 of the Constitution. All revenues received by the government (taxes, non-tax revenue), all loans raised, and all money received in repayment of loans are credited to this fund. No money can be withdrawn from the Consolidated Fund except by appropriation made by Parliament through the Appropriation Act.

Correct Answer: C. C. Article 267

The Contingency Fund of India is established under Article 267 of the Constitution. It is held at the disposal of the President to meet unforeseen expenditure pending authorisation by Parliament. The current corpus of the Contingency Fund is ₹500 crore. After Parliamentary approval, the amount is recouped from the Consolidated Fund of India.

Correct Answer: C. C. Provident funds, small savings, etc. held in trust

The Public Account of India, established under Article 266(2), receives money for which the Government acts as a banker or trustee rather than an owner. This includes Provident Fund collections, small savings, postal deposits, and other trust funds. Parliamentary appropriation is not required for withdrawals from the Public Account as the government is merely custodian of these funds.

Correct Answer: B. B. Provide funds to the government for a few months pending full Budget approval

Vote on Account allows the government to withdraw money from the Consolidated Fund for essential expenditure pending the passing of the full Appropriation Bill (Budget). It is typically granted for 2 months (one-sixth of the annual budget) and is needed when the new financial year begins before the budget is fully approved. An interim budget is different — it includes a full budget statement.