Budget Basics — Set 3

Correct Answer: A. 2005-06

• **Zero-Based Budgeting** = a budgeting method where every department must justify all its expenditures from scratch for each new period, instead of using the previous year's budget as a baseline. • **Introduced in India in 1986** — adopted under Rajiv Gandhi's government; requires each budget item to be justified on cost-benefit basis irrespective of prior year allocation. • 💡 Wrong-option analysis: [Option A] Incremental Budgeting: adds a percentage to the previous year's budget automatically; [Option B] Performance Budgeting: links budget to outputs/outcomes, not a blank-slate justification; [Option D] Programme Budgeting: organises expenditure by programmes, not a from-scratch approach.

Correct Answer: D. 4 months

• **Outcome Budget** = a document that translates financial outlays of each ministry into measurable deliverables, linking money spent to results achieved. • **Introduced in 2005–06** — India adopted it under P. Chidambaram; it supplements the regular budget and holds ministries accountable for outcomes. • 💡 Wrong-option analysis: [Option A] Zero-Based Budget: justifies all expenses from zero, not about outcome measurement; [Option B] Performance Budget: an older system of linking inputs to outputs, precursor to outcome budget; [Option D] Gender Budget: presents budget allocations through a gender lens, a subset of the budget.

Correct Answer: A. Acworth Committee

• **Gender Budget** = a statement within the Union Budget that presents government expenditure specifically targeted at women and girl children, split into Part A (100% women-specific) and Part B (30–99% benefit). • **First presented in 2005–06** — India was among the early countries to institutionalise a gender budget; it is not a separate budget but a sub-statement of the Union Budget. • 💡 Wrong-option analysis: [Option A] Women's Budget: not an official term; the correct name is Gender Budget Statement; [Option B] Pink Budget: an informal term used in media, not the official designation; [Option D] Social Budget: covers broader social sector spending, not women-specific.

Correct Answer: B. One day before the budget

• **Capital Budget** = the component of the Union Budget that deals with capital receipts (loans, disinvestment) and capital expenditure (asset creation, loan repayments). • **Creates or reduces assets** — capital expenditure builds infrastructure (roads, defence equipment) while capital receipts include market borrowings and recovery of loans. • 💡 Wrong-option analysis: [Option A] Revenue Budget: covers routine income (taxes) and day-to-day spending (salaries, subsidies); [Option C] Plan Budget: an older term (pre-2017) for planned development spending; [Option D] Non-Plan Budget: an older term for routine expenditure, discontinued from 2017–18.

Correct Answer: A. Morarji Desai

• **Revenue Budget** = the component of the Union Budget that covers revenue receipts (tax and non-tax) and revenue expenditure (salaries, interest, subsidies, pensions). • **Does not create assets** — revenue expenditure is consumed in the current year with no lasting physical asset; a surplus in revenue account is healthy. • 💡 Wrong-option analysis: [Option A] Capital Budget: deals with asset creation and long-term borrowings; [Option C] Plan Budget: older classification for development schemes; [Option D] Fiscal Budget: not a standard term; the correct term is either Revenue or Capital Budget.

Correct Answer: D. Selling government stakes in public sector units

• **Tax Revenue** = compulsory payments collected by the government without a direct quid-pro-quo, forming the largest component of government receipts. • **Direct + Indirect taxes** — direct taxes (income tax, corporate tax) are paid directly by individuals/companies; indirect taxes (GST, customs, excise) are collected through intermediaries. • 💡 Wrong-option analysis: [Option A] Non-Tax Revenue: includes dividends, fees, fines — not compulsory levies; [Option C] Capital Receipts: borrowings and disinvestment, not tax; [Option D] Revenue Receipts: the broader category that includes both tax and non-tax revenue.

Correct Answer: C. Investments in Five-Year Plans

• **Non-Tax Revenue** = government income from sources other than taxes, including interest receipts, dividends from PSUs, fees, fines, and external grants. • **Second largest revenue source** — dividends from RBI and Public Sector Enterprises are the major contributors to non-tax revenue in India. • 💡 Wrong-option analysis: [Option A] Tax Revenue: compulsory levies — income tax, GST, customs; [Option B] Capital Receipts: borrowings, disinvestment, not recurring income; [Option D] Grant-in-Aid: transfers from Centre to States, a sub-item of expenditure not a receipt category.

Correct Answer: C. General elections are approaching

• **Disinvestment** = the process by which the government sells its equity stake in Public Sector Undertakings (PSUs) to raise funds or improve efficiency. • **Capital receipt** — proceeds from disinvestment go into the National Investment Fund (NIF) or directly to the Consolidated Fund; it reduces government ownership. • 💡 Wrong-option analysis: [Option A] Privatisation: complete transfer of ownership to private sector, whereas disinvestment can be partial; [Option B] Nationalisation: bringing private companies under government ownership, opposite of disinvestment; [Option D] Monetisation: leasing government assets without ownership transfer.

Correct Answer: B. Finance Bill

• **Fiscal Responsibility and Budget Management (FRBM) Act** = a 2003 law that set targets to eliminate revenue deficit and reduce fiscal deficit to 3% of GDP, enforcing fiscal discipline. • **Enacted in 2003** — it required medium-term fiscal plans, was amended several times; the N.K. Singh Committee (2017) recommended a Debt-to-GDP ratio anchor of 60%. • 💡 Wrong-option analysis: [Option A] FEMA: Foreign Exchange Management Act, deals with forex transactions; [Option B] RBI Act: governs the Reserve Bank, not government finances; [Option D] CAG Act: governs the Comptroller and Auditor General's functions.

Correct Answer: C. Routine functioning and debt interest

• **N.K. Singh FRBM Review Committee** = the committee set up in 2016 to review the FRBM Act, which recommended replacing the fiscal deficit target with a Debt-to-GDP ratio as the fiscal anchor. • **Debt target: 60% of GDP** — Centre 40% + States 20%; fiscal deficit target of 2.5% of GDP for Centre by 2022–23 was also recommended. • 💡 Wrong-option analysis: [Option A] Kelkar Committee: reviewed FRBM in 2012, not 2016; [Option B] Rangarajan Committee: worked on poverty estimation, not FRBM; [Option D] Tendulkar Committee: poverty line estimation committee, unrelated to fiscal management.