Union Budget & Fiscal Deficit — Set 4

Correct Answer: A. A. All expenditure starts at zero and must be freshly justified each year

Zero Based Budgeting (ZBB) is a budgeting approach where every department starts from a 'zero base' each year and must justify all its expenditure from scratch, regardless of previous year's allocations. Unlike traditional incremental budgeting, ZBB forces a review of every programme's cost-effectiveness. India has experimented with ZBB for selected departments.

Correct Answer: A. A. Present the budget in terms of outcomes and results achieved, not just financial inputs

The Outcome Budget was introduced in India in 2005-06. It converts financial allocations into measurable deliverables — linking money spent to specific outcomes (e.g., km of roads built, schools constructed, health coverage achieved). It shifts focus from input-based to performance-based accountability, enhancing transparency in government spending.

Correct Answer: B. B. Budget allocations relevant to women's welfare and gender equality across all ministries

The Gender Budget, introduced in India in 2005-06, presents a statement showing allocations for women across all ministries and departments. It has two parts: Part A (100% allocation for women) and Part B (30%-99% allocation for women). It tracks how much of the Union Budget addresses gender equity and women's development needs across sectors.

Correct Answer: B. B. Projected estimates of receipts and expenditure for the coming financial year

Budget Estimates (BE) are the projected figures of receipts and expenditure for the coming financial year, presented at the beginning of the year. They represent the government's plan for income and spending. BE are presented to Parliament in February and form the basis for the Appropriation Act and Finance Act passed to authorize the budget.

Correct Answer: B. B. Estimates revised mid-year to reflect actual trends

Revised Estimates (RE) are the mid-year revision of Budget Estimates, presented along with the next year's Budget in February. They reflect actual trends in revenues and expenditure, incorporating changes due to policy decisions, shortfalls, or overruns. RE is important for fiscal management as it gives a realistic picture of the current year's fiscal position.

Correct Answer: C. C. Actuals for two years ago

When the Union Budget for year N+1 is presented, it includes Actuals (final audited figures) for year N-1, Revised Estimates for year N, and Budget Estimates for year N+1. Actuals are the final figures certified by the Comptroller and Auditor General (CAG) after the year ends. They enable comparison of budget estimates vs actual outcomes.

Correct Answer: C. C. Article 280

The Finance Commission is constituted under Article 280 of the Constitution every five years (or earlier). The President appoints the Finance Commission to recommend the distribution of tax revenues between the Centre and States, the principles for grants-in-aid to states, and measures to augment the Consolidated Fund of a state. The 15th Finance Commission covers 2021-26.

Correct Answer: A. A. NK Singh

The 15th Finance Commission (2021-26) was chaired by NK Singh, former IAS officer and Revenue Secretary. It recommended that states should receive 41% of the divisible pool of Central taxes (reduced from 42% recommended by the 14th FC due to the creation of Jammu & Kashmir as a Union Territory). The 15th FC also introduced performance-based grants.

Correct Answer: C. C. 41%

The 15th Finance Commission recommended that states receive 41% of the net proceeds of central taxes from the divisible pool (2021-26). The slight reduction from 42% (14th FC) was due to Jammu & Kashmir becoming a Union Territory with legislature. Devolution is the constitutional entitlement of states and is the most significant fiscal transfer from Centre to States.

Correct Answer: C. C. Consolidated Fund of India

Grants-in-Aid from the Centre to States are charged to the Consolidated Fund of India and must be authorised by Parliament through the Appropriation Act. These grants flow as revenue transfers for specific purposes (tied grants) or as general purpose grants. Finance Commission grants and Centrally Sponsored Scheme grants are both types of Centre-to-State transfers.