Budget Basics — Set 6

Correct Answer: D. Article 265

• **Revenue Receipts** = the income of the government that does not create a liability or reduce an asset, comprising tax revenues and non-tax revenues. • **Recurring in nature** — these are routine annual inflows; if revenue receipts exceed revenue expenditure, the difference is the revenue surplus. • 💡 Wrong-option analysis: [Option A] Capital Receipts: create liabilities (borrowings) or reduce assets (disinvestment); [Option B] Tax Revenue: a sub-component of revenue receipts, not the full category; [Option D] Non-Tax Revenue: another sub-component of revenue receipts (fees, dividends).

Correct Answer: B. Printing new currency to meet the budget gap

• **Capital Receipts** = government receipts that either create a liability (borrowings, small savings) or reduce an asset (recovery of loans, disinvestment proceeds). • **Includes market borrowings** — these are the largest component of capital receipts and the primary means of financing the fiscal deficit. • 💡 Wrong-option analysis: [Option A] Revenue Receipts: do not create liabilities; [Option B] Non-Tax Revenue: a sub-set of revenue receipts; [Option D] Disinvestment: a sub-component of capital receipts, not the full category.

Correct Answer: D. Public Account of India

• **Subsidy** = a financial grant or tax concession given by the government to reduce the market price of a good or service below its cost of production, benefiting consumers or producers. • **Food, fertiliser, petroleum** — these are the three major subsidies in India's budget; food subsidy (via FCI and PDS) is the largest, administered under the National Food Security Act. • 💡 Wrong-option analysis: [Option A] Tax Expenditure: revenue foregone through exemptions, not a direct payment; [Option B] Transfer Payment: includes subsidies but also pensions and grants; 'subsidy' is the specific term for price support; [Option D] Welfare Expenditure: a broad term covering education, health, etc., not exclusively price support.

Correct Answer: C. N.K. Singh

• **National Investment Fund (NIF)** = a fund established in 2005 to receive disinvestment proceeds and channel them to selected social sector and capital investment schemes. • **Restructured in 2013** — disinvestment proceeds are now credited to the Consolidated Fund of India directly, and the NIF framework was changed; Budget 2021 proposed asset monetisation via NMP. • 💡 Wrong-option analysis: [Option A] Consolidated Fund: main government account; [Option B] Public Account: holds trust and other funds; [Option D] Stabilisation Fund: used to manage commodity price volatility, not disinvestment proceeds.

Correct Answer: B. Detailed Demands for Grants

• **Twelfth Finance Commission** = the Finance Commission (2005–2010) chaired by C. Rangarajan that recommended raising states' share in central taxes from 29.5% to 30.5%. • **Chaired by C. Rangarajan** — it also recommended debt-relief to states conditional on enacting Fiscal Responsibility laws. • 💡 Wrong-option analysis: [Option A] Y.V. Reddy: chaired the 14th Finance Commission; [Option B] N.K. Singh: chaired the 15th Finance Commission; [Option D] Bimal Jalan: served as RBI Governor, not Finance Commission chair.

Correct Answer: B. September 30

• **Fourteenth Finance Commission** = the Finance Commission (2015–2020) chaired by Y.V. Reddy that made the landmark recommendation to raise states' share in central taxes from 32% to 42%. • **42% devolution** — the highest-ever share given to states; it increased states' untied funds significantly, reducing conditional central grants. • 💡 Wrong-option analysis: [Option A] C. Rangarajan: chaired 12th FC; [Option B] N.K. Singh: chaired 15th FC; [Option D] Vijay Kelkar: chaired 13th FC (2010–2015).

Correct Answer: D. To keep expenditure equal to revenue

• **Debt-to-GDP Ratio** = the ratio of a country's total public debt to its Gross Domestic Product, used to assess a government's ability to repay its obligations. • **FRBM target: 60% of GDP** — the N.K. Singh Committee recommended Centre 40% + States 20%; India's actual ratio was around 84% of GDP in 2020 due to COVID-19 stimulus spending. • 💡 Wrong-option analysis: [Option A] Fiscal Deficit: the annual flow of new borrowing, not the stock of accumulated debt; [Option B] Current Account Deficit: relates to external trade and payments, not public debt; [Option D] Revenue Deficit: gap between revenue spending and income, not debt stock.

Correct Answer: C. Nirmala Sitharaman

• **Sunset Clause** = a provision in a law or scheme that automatically terminates it after a specified date unless renewed by Parliament or the executive. • **Used in tax exemptions** — sunset clauses in the Income Tax Act required new manufacturing units to be set up by a certain date to claim reduced tax rates, ensuring time-bound incentives. • 💡 Wrong-option analysis: [Option A] Zero-Based Budgeting: requires fresh justification every year but is about budget process, not automatic termination; [Option B] Lapse of Appropriation: unspent budget lapses at year end, a different concept; [Option D] Moratorium: a suspension of payment obligations, unrelated to law expiry.

Correct Answer: B. Corporation Tax

• **Article 266(2)** = the constitutional provision establishing the Public Account of India, where money received by the government other than Consolidated Fund receipts is kept. • **Government as trustee** — monies in the Public Account (provident funds, court deposits, postal savings) belong to others; the government is merely a custodian. • 💡 Wrong-option analysis: [Option A] Article 266(1): establishes the Consolidated Fund of India; [Option B] Article 267: establishes the Contingency Fund; [Option D] Article 112: mandates the Annual Financial Statement (Union Budget).

Correct Answer: A. Income Tax

• **Excess Grants** = grants sought by the government after actual expenditure has already exceeded the sanctioned grants in a financial year, requiring Parliament's post-facto approval. • **Regularised by Parliament** — the Public Accounts Committee examines excess grants; Parliament must vote to regularise them under Article 115(1)(b). • 💡 Wrong-option analysis: [Option A] Supplementary Demands: sought before the expenditure occurs when a shortfall is anticipated; [Option B] Vote on Account: a temporary grant before the budget, not a post-expenditure regularisation; [Option D] Token Demands: a demand of ₹1 to draw attention to a policy; not related to excess spending.