Union Budget & Fiscal Deficit — Set 3

Correct Answer: B. B. Give effect to financial proposals including new taxes

The Finance Bill is a Money Bill presented along with the Union Budget to give effect to the financial proposals of the government for the next financial year. It contains changes to tax laws (income tax, customs, excise, GST) and other financial measures. It must be passed by Parliament before March 31 of each year for the new financial year.

Correct Answer: B. B. Authorise withdrawal from Consolidated Fund for approved expenditure

The Appropriation Bill authorises the Government to withdraw money from the Consolidated Fund of India to meet approved expenditure for the financial year. Once passed by Parliament, it becomes the Appropriation Act. No money can be spent from the Consolidated Fund without the Appropriation Act. Article 114 of the Constitution governs Appropriation Bills.

Correct Answer: C. C. Capital receipts and capital expenditure

The Capital Budget consists of Capital Receipts (borrowings, recovery of loans, disinvestment proceeds) and Capital Expenditure (asset creation, loans to states, repayment of borrowings). Capital expenditure creates assets or reduces liabilities. The capital budget focuses on long-term investment that builds the government's asset base and national infrastructure.

Correct Answer: B. B. Revenue receipts and revenue expenditure

The Revenue Budget consists of Revenue Receipts (tax revenue + non-tax revenue) and Revenue Expenditure (salaries, interest payments, subsidies, pensions). Revenue expenditure does not create assets — it is for day-to-day operations of the government. When revenue expenditure exceeds revenue receipts, the result is a revenue deficit.

Correct Answer: C. C. Both direct taxes and indirect taxes

Tax Revenue includes both direct taxes (income tax, corporation tax) and indirect taxes (GST, customs duty, excise duty). In India, the gross tax revenue is divided between the Centre (after devolution) and States as per the Finance Commission's recommendations. Tax revenue is the largest source of revenue receipts for the government.

Correct Answer: B. B. Interest receipts, dividends from PSUs, fees, fines

Non-Tax Revenue includes interest receipts on loans given to states and PSUs, dividends and profits from public sector undertakings, fees for services rendered, fines, penalties, and external grants. The RBI's surplus transfer (dividend) to the government is also a major non-tax revenue item. It forms the second component of revenue receipts after tax revenue.

Correct Answer: C. C. Borrowings, disinvestment proceeds, recovery of loans

Capital Receipts include: (1) Borrowings from domestic markets, external bodies, and RBI; (2) Disinvestment proceeds from sale of government's equity in PSUs; (3) Recovery of loans and advances given to state governments and others. Borrowings are the largest component of capital receipts and contribute to fiscal deficit.

Correct Answer: C. C. Capital Receipts

Disinvestment proceeds (from sale of government's equity stake in PSUs) are classified as Capital Receipts in the Union Budget. This is because they represent a reduction in government assets (equity holdings), which are capital in nature. These proceeds are non-recurring and cannot be used to fund regular revenue expenditure sustainably.

Correct Answer: B. B. Revenue Expenditure

Interest payments on government borrowings are classified as Revenue Expenditure because they are recurring in nature and do not create any new assets. Interest payments are the single largest item in the revenue expenditure of the Government of India, consuming a significant share of tax revenue. They are a committed liability arising from accumulated public debt.

Correct Answer: C. C. Revenue Expenditure

Subsidies (food subsidy, fertiliser subsidy, fuel subsidy, etc.) are classified as Revenue Expenditure because they are current transfers that do not create any productive assets for the government. High subsidy expenditure contributes to revenue deficit. The government has been progressively reforming the subsidy regime through direct benefit transfers (DBT) to improve targeting efficiency.