Union Budget & Fiscal Deficit — Set 8

Correct Answer: B. B. Brief summary of key budget numbers in a citizen-friendly format

'Budget at a Glance' is a summary document presented with the Union Budget that provides key budget numbers in a compact, easy-to-understand format covering total receipts, total expenditure, fiscal deficit, revenue deficit, major expenditure heads, and tax proposals. It is designed for the general public and media, making the budget accessible beyond technical details in the full budget documents.

Correct Answer: B. B. Fiscal stimulus (emergency spending during COVID-19)

The Pradhan Mantri Garib Kalyan Package (PMGKP) announced in March 2020 was a fiscal stimulus package worth approximately ₹1.70 lakh crore to support poor and vulnerable sections during the COVID-19 lockdown. It included free food grains, cash transfers, and insurance for healthcare workers. Such emergency spending temporarily widened the fiscal deficit significantly above FRBM targets.

Correct Answer: C. C. Income tax collected

Income Tax collected is a Revenue Receipt (Tax Revenue), not a Capital Account item. The Capital Account includes Capital Receipts (borrowings, disinvestment, recovery of loans) and Capital Expenditure (asset creation, loans given, repayment of borrowings). The distinction between revenue and capital accounts is fundamental to understanding the budget structure and fiscal health indicators.

Correct Answer: C. C. Zero fiscal deficit

A balanced budget typically means that total receipts excluding borrowings equal total expenditure — i.e., fiscal deficit is zero. In practice, most modern governments run deficit budgets. A strictly balanced budget (zero fiscal deficit) would mean no borrowings whatsoever. A cyclically balanced budget (balanced over the business cycle) is considered more practical as a fiscal norm.

Correct Answer: C. C. Three years

The Medium Term Expenditure Framework (MTEF) Statement was introduced in India's budget documents and covers rolling three-year expenditure projections for major ministries and departments. It provides indicative ceilings for expenditure in the medium term, helping ministries plan their programmes over a multi-year horizon. It complements the Medium Term Fiscal Policy Statement in providing a comprehensive fiscal framework.

Correct Answer: C. C. Finance Commission devolution and Central Assistance for State Plans

Central tax revenues shared with states flow through two main channels: (1) Devolution as per Finance Commission recommendations (states' share of the divisible pool — currently 41%); and (2) Grants-in-Aid and Central Assistance for state development plans. The Finance Commission devolution is unconditional, while grants under Centrally Sponsored Schemes have conditions attached.

Correct Answer: B. B. Advance funds given to officials for petty cash/incidental expenses

An imprest is a fixed advance of cash provided to government officials or departments for petty expenses that are too small for formal payment procedures. Officials use the imprest for minor official expenses and then submit claims with vouchers for replenishment. The imprest system allows efficient handling of small-value transactions without going through full financial sanction processes.

Correct Answer: B. B. Market loans, T-Bills, securities against small savings, etc.

Internal (domestic) debt of India comprises: (1) Market Loans (G-Secs and T-Bills); (2) Securities against small savings; (3) State Provident Fund borrowings; (4) Reserve Funds and Deposits; (5) Ways and Means Advances (WMA) from RBI. Market loans form the dominant share. Internal debt financing is preferred over external debt as it avoids exchange rate risk.

Correct Answer: B. B. Short-term credit facility for government to manage temporary cash flow mismatches

Ways and Means Advances (WMA) are temporary short-term credit facilities extended by the RBI to the Government of India (and state governments) to bridge temporary cash flow mismatches between receipts and payments. WMA must be repaid within 90 days. They are different from market borrowings as they are not meant to finance the fiscal deficit but to manage day-to-day cash management.

Correct Answer: C. C. RBI on behalf of the Government

Public Debt Management (issuance and management of government securities — G-Secs, T-Bills, state development loans) is handled by the Reserve Bank of India on behalf of the Central Government under the RBI Act 1934. The RBI manages the government's borrowing calendar, conducts auctions, and handles debt management operations. There have been proposals to create a separate Public Debt Management Agency (PDMA).