Union Budget & Fiscal Deficit — Set 12

Correct Answer: B. B. All tax revenues, non-tax revenues, borrowings, and loan repayments received by the government

The Consolidated Fund of India (Article 266) receives ALL revenues received by the government (tax and non-tax), all loans raised by the government, and all money received in repayment of loans given by the government. It is the main fund of the government. All government expenditure (except charged expenditure from specific accounts) requires appropriation from this fund by Parliament.

Correct Answer: C. C. ₹500 crore

The Contingency Fund of India has a corpus of ₹500 crore (enhanced from ₹50 crore in 2005). It is held at the President's disposal for meeting unforeseen/urgent expenditure that cannot await Parliamentary approval. Once used, it must be replenished by Parliament through a Supplementary Demand for Grants. State governments have their own Contingency Funds at the disposal of respective Governors.

Correct Answer: B. B. Two months

Vote on Account typically covers government expenditure for two months (one-sixth of the annual budget estimate) to allow the government to continue functioning pending full budget approval by Parliament. In election years or other special circumstances, it may cover a longer period (3-4 months). It only covers expenditure, not tax proposals, which require the Finance Bill.

Correct Answer: B. B. Tax burden cannot be shifted — the person on whom it is levied pays it directly

Direct taxes are taxes where the incidence and burden fall on the same person — the tax cannot be shifted to someone else. Examples include Income Tax and Corporation Tax. The taxpayer directly pays the tax to the government. In contrast, indirect taxes (like GST) can be passed on to consumers. Direct taxes are generally considered more progressive (higher rates for higher incomes) than indirect taxes.

Correct Answer: B. B. The tax burden can be shifted from the payer to another person (usually consumers)

Indirect taxes are levied on goods and services (production or consumption), not on income. The producer or seller pays the tax to the government but shifts the burden to consumers through higher prices. Examples include GST, Customs Duty, Central Excise. Indirect taxes are generally regressive (consume a higher proportion of income from poorer households) as all consumers pay the same rate.

Correct Answer: B. B. Eliminating outdated and inefficient programmes by requiring fresh justification

Zero Based Budgeting (ZBB) is most useful for eliminating inefficient, outdated, or low-priority government programmes by requiring every programme to justify its existence and budget from scratch each year. Unlike incremental budgeting (which adds to last year's base), ZBB forces a cost-benefit analysis of all activities. It was introduced in the US by Jimmy Carter for federal agencies and India has applied it selectively.

Correct Answer: B. B. Physical outputs and outcomes achieved per rupee of budget allocation

The Outcome Budget converts financial allocations into measurable physical targets and tracks actual outcomes achieved. For example, km of roads built per ₹1,000 crore, number of school midday meals served, beneficiaries under health insurance per rupee spent. Introduced in 2005-06, Outcome Budgets are presented by major ministries to track the effectiveness of public expenditure.

Correct Answer: B. B. 100% allocation earmarked for women's development

The Gender Budget Statement has two parts: Part A covers schemes where 100% of the allocation is for women (such as Mahila Shakti Kendra, Mahila Police Volunteers, schemes under WCD Ministry). Part B covers schemes where 30-99% of the allocation benefits women (e.g., MGNREGS, PM Awas Yojana). Together they track how much of the total budget addresses women's needs.

Correct Answer: B. B. Economic growth projections, tax base expansion, compliance improvements, and policy changes

Budget Estimates for direct taxes (income tax, corporation tax) are based on a combination of: previous year's actual collections, projected nominal GDP growth rate, expected improvements in tax compliance (e-filing, GST data), policy changes (new exemptions, rate changes), and economic trends. The Ministry of Finance's Revenue Forecast Division prepares these projections in consultation with CBDT and CBIC.

Correct Answer: B. B. Revised Estimates are often larger due to overruns on subsidies, emergency spending

Revised Estimates for revenue expenditure often exceed Budget Estimates due to overruns on food subsidy, fertiliser subsidy, interest payments, and unforeseen emergency spending. For example, a spike in food grain prices increases food subsidy beyond BE. Revenue shortfalls may also require supplementary borrowings. The gap between RE and BE is an indicator of the government's ability to manage its fiscal plans.