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Quick recap: Budget and fiscal policy on one page

മലയാളത്തിൽ വിശദീകരണം

Budget and fiscal policy · Quick recap · Fact-checked on 20 October 2026 · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

Both parts of Budget and fiscal policy condensed for quick revision: Article 112 and the three accounts, budget documents and the 2017-18 reforms, the revenue–capital tests, every deficit measure, public debt and the FRBM Act to today's debt anchor, with a one-table overview and eight mixed questions.

Each idea is explained first in Malayalam (മലയാളം), ending with the English and Hindi exam terms, followed by the same point in exam English. UPSC Prelims is in English or Hindi, so understand it in Malayalam and revise it in English.

ധനനയം എന്നാൽ നികുതി, ചെലവ്, കടം എന്നിവയിലൂടെ പൊതുസൗകര്യങ്ങൾ നൽകുക, അസമത്വം കുറയ്ക്കുക, സമ്പദ്‌വ്യവസ്ഥ സ്ഥിരപ്പെടുത്തുക: മാന്ദ്യത്തിൽ കൂടുതൽ ചെലവ്, കുതിപ്പിൽ കുറവ്. ആവശ്യത്തിനനുസരിച്ച് വെള്ളം തുറക്കുന്ന അണക്കെട്ടിന്റെ ഷട്ടർ പോലെ. ബജറ്റ് അതിന്റെ പ്രധാന ഉപകരണം. (→ English: fiscal policy · हिन्दी: राजकोषीय नीति)

In exam Englishfiscal policy is the government's use of taxes, spending and borrowing to provide public goods, reduce inequality and steady the economy, spending more in a slowdown and less in a boom. The Union Budget is its main tool. Part 1 of this chapter covered the Budget's frame and its revenue–capital split; part 2 covered deficits, debt and the FRBM Act. This recap brings both together.

അനുച്ഛേദം 112 ബജറ്റിനെ വാർഷിക ധനകാര്യ പ്രസ്താവന എന്ന് വിളിക്കുന്നു. രാഷ്ട്രപതി, ജഡ്ജിമാർ, സിഎജി എന്നിവരുടെ ശമ്പളം, കടപ്പലിശ തുടങ്ങിയവ സഞ്ചിത നിധിയിൽ ചുമത്തിയ ചെലവ്: ചർച്ചയുണ്ട്, വോട്ടില്ല. അക്കൗണ്ടുകൾ മൂന്ന്: ഇന്ത്യയുടെ സഞ്ചിത നിധി (പാർലമെന്റ് നിയമമില്ലാതെ എടുക്കാനാവില്ല), പൊതു അക്കൗണ്ട് (മറ്റുള്ളവരുടെ പണം, ബാങ്ക് നിക്ഷേപം പോലെ), ആകസ്മിക നിധി (രാഷ്ട്രപതിയുടെ കൈയിലെ അടിയന്തര നിധി). (→ English: expenditure charged on the Consolidated Fund · हिन्दी: संचित निधि पर भारित व्यय)

In exam EnglishArticle 112 calls the Budget the annual financial statement. It shows expenditure charged on the Consolidated Fund (the President, presiding officers, Supreme Court judges, the CAG, debt charges), which is discussed but not voted, separately from voted spending, and keeps the revenue account apart. Money sits in three accounts: the Consolidated Fund of India (Article 266(1)), from which nothing moves without an Appropriation Act; the Public Account (Article 266(2)), holding money the government keeps for others; and the Contingency Fund (Article 267), at the President's disposal for emergencies.

ബജറ്റ് രേഖകൾ: പ്രസംഗം, വാർഷിക പ്രസ്താവന, ധനാഭ്യർഥനകൾ, ധനവിനിയോഗ, ധനകാര്യ ബില്ലുകൾ, ഫല ബജറ്റ്, ജെൻഡർ ബജറ്റ്. 2017-18 മുതൽ ഫെബ്രുവരി 1-ന് ബജറ്റ്; ഏപ്രിലിനു മുമ്പേ അംഗീകാരം കിട്ടുന്നതിനാൽ വോട്ട് ഓൺ അക്കൗണ്ട് ആവശ്യം കുറഞ്ഞു. റെയിൽവേ ബജറ്റ് ലയിച്ചു, പദ്ധതി-പദ്ധതിയേതര വിഭജനം പോയി. (→ English: vote on account · हिन्दी: लेखानुदान)

In exam EnglishThe budget documents include the speech, the annual financial statement, the Demands for Grants, the Appropriation and Finance Bills, the FRBM statements, and two documents from 2005-06: the Outcome Budget and the Gender Budget Statement. From 2017-18 the Budget moved to 1 February so it can pass before April and a routine vote on account is not needed, the Railway Budget (separate since 1924) was merged, and the plan/non-plan split was dropped.

ഓരോ ഇനത്തിനും ഒരേ പരീക്ഷണം: കടം കൂടിയോ, ആസ്തി കുറഞ്ഞോ? ഉവ്വെങ്കിൽ അവ മൂലധന വരവുകൾ: കടങ്ങൾ, വായ്പാ തിരിച്ചടവ്, ഓഹരി വിൽപന. അല്ലെങ്കിൽ റവന്യൂ വരവ്: നികുതി, ലാഭവിഹിതം, ആർബിഐ മിച്ചം. ചെലവിൽ ആസ്തി വന്നാൽ മൂലധനം: റോഡ്, സംസ്ഥാനങ്ങൾക്ക് വായ്പ, കടം വീട്ടൽ. വന്നില്ലെങ്കിൽ റവന്യൂ ചെലവ്: പലിശ, സബ്സിഡി, ശമ്പളം, സംസ്ഥാനങ്ങൾക്കുള്ള ഗ്രാന്റ്. പശുവിന്റെ പാൽ വിൽക്കുന്നത് വരുമാനം, പശുവിനെത്തന്നെ വിൽക്കുന്നത് മൂലധനം. (→ English: capital receipts · हिन्दी: पूँजीगत प्राप्तियाँ)

In exam EnglishEvery entry passes one of two tests. A receipt that creates a liability or reduces an asset is among the capital receipts: borrowing, loan recoveries, disinvestment. Otherwise it is a revenue receipt: net taxes after the states' share, dividends, the RBI surplus, interest, fees, spectrum money. Spending that creates an asset or reduces a liability is capital expenditure: infrastructure, defence equipment, loans to states, equity, debt repayment. Everything else is revenue expenditure: interest, subsidies, salaries, pensions and grants to states, even grants that the states spend on assets.

ധനക്കമ്മി: ആകെ ചെലവിൽനിന്ന് റവന്യൂ വരവും കടമല്ലാത്ത മൂലധന വരവും കുറച്ചാൽ ബാക്കിയുള്ള കടം. റവന്യൂ കമ്മി: നിത്യച്ചെലവിനുള്ള കടം; ആസ്തി ഗ്രാന്റുകൾ കുറച്ചാൽ ഫലപ്രദ റവന്യൂ കമ്മി. പ്രാഥമിക കമ്മി: ധനക്കമ്മിയിൽനിന്ന് പലിശ കുറച്ചാൽ കിട്ടുന്നത്; മുത്തച്ഛന്റെ കടപ്പലിശയല്ലാതെ നമ്മുടെ ചെലവ് എത്രയെന്ന് പറയും. അമിത കടം സ്വകാര്യ നിക്ഷേപം പുറന്തള്ളും, വില ഉയർത്താം. (→ English: primary deficit · हिन्दी: प्राथमिक घाटा)

In exam EnglishThe fiscal deficit is total expenditure minus revenue receipts and non-debt capital receipts: the year's borrowing. The revenue deficit (revenue expenditure minus revenue receipts) shows borrowing for running costs, and the effective revenue deficit, added in 2012, deducts grants for creating capital assets. The primary deficit removes interest payments from the fiscal deficit to show the effect of current policy. The budget deficit lost its use when ad hoc treasury bills ended in 1997, and the monetised deficit is the part financed by the RBI. Heavy borrowing can crowd out private investment, add to inflation if monetised, and raise the interest bill.

Budget and fiscal policy at a glance
Topic	Key facts
Annual financial statement	Art 112; charged items discussed, not voted (Art 113(1))
Three accounts	Consolidated Fund 266(1); Public Account 266(2); Contingency Fund 267
2017-18 reforms	1 February Budget; Railway Budget merged; plan/non-plan ended
Capital receipts	Borrowing, loan recoveries, disinvestment
Revenue expenditure	Interest, subsidies, salaries, pensions, grants to states
Fiscal deficit	Total expenditure − (revenue receipts + non-debt capital receipts)
Primary deficit	Fiscal deficit − interest payments
Effective revenue deficit	Revenue deficit − grants for capital assets (2012)
FRBM Act	2003; amended 2004, 2012, 2015, 2018; escape clause up to 0.5% of GDP
Debt anchor	Centre's debt 50% ±1 of GDP by 31 March 2031

വരുമാന വളർച്ച പലിശയെക്കാൾ കൂടിയാൽ കടഭാരം കുറയും. ധന ഉത്തരവാദിത്ത ബജറ്റ് മാനേജ്മെന്റ് നിയമം (2003): കമ്മി 3%, റവന്യൂ കമ്മി പൂജ്യം. 2018-ൽ എൻ.കെ. സിങ് സമിതിക്കുശേഷം: കട ലക്ഷ്യം (ആകെ 60%, കേന്ദ്രം 40%), റവന്യൂ കമ്മി ലക്ഷ്യങ്ങൾ ഒഴിവാക്കി, അടിയന്തരങ്ങളിൽ 0.5% വരെ ഒഴിവ് വ്യവസ്ഥ (2020-ൽ ഉപയോഗിച്ചു). ഇപ്പോൾ കമ്മി 4.4% (2025-26), 4.3% (2026-27); 2031-ഓടെ കേന്ദ്രകടം 50%. (→ English: escape clause · हिन्दी: निर्गम खंड)

In exam EnglishDebt is sustainable when nominal growth beats the interest rate and the primary deficit stays small; states borrow under Article 293, needing the Centre's consent while they owe it money. The Fiscal Responsibility and Budget Management Act of 2003 set a 3 per cent fiscal deficit and a zero revenue deficit, was amended in 2004, 2012 and 2015, and was rewritten in 2018 after the N.K. Singh committee: a debt anchor (60 per cent general government, 40 per cent Centre), a 3 per cent deficit target, revenue deficit targets dropped, and an escape clause of up to 0.5 per cent of GDP, used in February 2020. After the pandemic the deficit came down to 4.4 per cent in 2025-26 (revised estimate) and 4.3 per cent in 2026-27 (budget estimate), and the new goal is the Centre's debt at 50 per cent of GDP, plus or minus 1, by 31 March 2031.

Exam traps

"Budget" is not a constitutional word; Article 112 says annual financial statement.
Charged expenditure is discussed but not voted; the CAG's and Supreme Court judges' salaries are charged.
The Contingency Fund is at the President's disposal; Public Account money needs no appropriation.
Disinvestment and loan recoveries are capital receipts; dividends, the RBI surplus and spectrum money are revenue receipts.
Grants to states are revenue expenditure; loans to states and debt repayment are capital expenditure.
Primary deficit = fiscal deficit − interest; effective revenue deficit = revenue deficit − grants for capital assets.
The 2018 amendment dropped the revenue deficit targets and made debt the anchor; the escape clause allows up to 0.5% of GDP.
From 2017-18 the plan/non-plan split ended, not the revenue/capital split.

Recap

Fiscal policy: allocation, distribution, stabilisation through taxes, spending and borrowing.
Art 112 annual financial statement; charged versus voted; three accounts under Art 266 and 267.
Budget documents include the Outcome Budget and Gender Budget Statement (2005-06); 2017-18 reforms changed the date, merged the Railway Budget and ended plan/non-plan.
Capital receipts create liabilities or reduce assets; capital expenditure creates assets or reduces liabilities.
Fiscal deficit = borrowing; revenue, effective revenue and primary deficits show what the borrowing is for.
Deficits risk crowding out, inflation if monetised, and a growing interest burden; debt is sustainable when growth exceeds the interest rate.
FRBM Act 2003, amended 2004, 2012, 2015, 2018; N.K. Singh committee (2017) and the escape clause.
Deficit 4.4% of GDP in 2025-26 (RE), 4.3% in 2026-27 (BE); debt target 50% ±1 of GDP by 31 March 2031.

Practice questions

Q1. Which one of the following is NOT charged on the Consolidated Fund of India?

Salaries and allowances of the Speaker of the Lok Sabha
Salaries and pensions of Supreme Court judges
Salaries of Union ministers
Debt charges for which the Government of India is liable

Show answer

Answer: C. Salaries of Union ministers

Ministers' salaries are voted expenditure, not charged. The Speaker's salary, Supreme Court judges' salaries and pensions, and the Government of India's debt charges are all listed as charged in Article 112(3).

Q2. Consider the following statements:
1. The Public Account of India is established under Article 266(2).
2. The Contingency Fund of India is placed at the disposal of the Finance Minister.
Which of the statements given above is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2

Show answer

Answer: A. 1 only

Statement 1 is right. Statement 2 is wrong: Article 267 places the Contingency Fund at the disposal of the President. So '2 only', 'both' and 'neither' are wrong.

Q3. Consider the following items in the Union Budget:
1. Recovery of loans given to state governments
2. Interest received on loans given to state governments
3. Proceeds from disinvestment
Which of the above are capital receipts?

1 and 2 only
1 and 3 only
2 and 3 only
1, 2 and 3

Show answer

Answer: B. 1 and 3 only

Loan recoveries reduce an asset (the loan) and disinvestment reduces the government's shareholding, so both are capital receipts. Interest is earned income that reduces no asset, so it is a non-tax revenue receipt; every option that includes item 2 is therefore wrong.

Q4. With reference to the Union Budget, consider the following statements:
1. The Outcome Budget was first presented for 2005-06.
2. Since 2017-18 the Union Budget has been presented on 1 February.
3. Since 2017-18 the Railway Budget has been presented separately on the same day as the Union Budget.
How many of the above statements are correct?

Only one
Only two
All three
None

Show answer

Answer: B. Only two

Statements 1 and 2 are correct. Statement 3 is wrong: from 2017-18 the Railway Budget was merged into the Union Budget and is no longer presented separately. So 'only one', 'all three' and 'none' are wrong.

Q5. If the primary deficit of the Union government is zero, which one of the following is true?

The fiscal deficit is also zero
The fiscal deficit equals interest payments
The revenue deficit equals interest payments
The government has no outstanding debt

Show answer

Answer: B. The fiscal deficit equals interest payments

Primary deficit = fiscal deficit − interest; if it is zero, the fiscal deficit equals interest payments, so borrowing only covers interest. The fiscal deficit is zero only if interest is also zero; the revenue deficit is not part of this formula; and interest payments themselves show that debt is outstanding.

Q6. Consider the following statements:
1. Ad hoc treasury bills were discontinued from 1 April 1997 and replaced by ways and means advances.
2. The monetised deficit is the increase in the RBI's net credit to the government.
Which of the statements given above is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2

Show answer

Answer: C. Both 1 and 2

Both statements are correct, as part 2 explained. So '1 only', '2 only' and 'neither' are wrong.

Q7. Under the FRBM Act as amended in 2018, which one of the following is NOT a ground on which the escape clause can be invoked?

National security or war
National calamity
Collapse of agriculture
A fall in the stock market index

Show answer

Answer: D. A fall in the stock market index

The Act lists national security, war, national calamity, collapse of agriculture, far-reaching structural reforms and a sharp fall in real output growth; a fall in share prices is not a ground. The other three options are listed grounds.

Q8. Which one of the following is the fiscal anchor announced by the Union government for the period from 2026-27?

A fiscal deficit of 3 per cent of GDP by 2026-27
Elimination of the revenue deficit by 2028
Central government debt of 50 per cent ±1 of GDP by 31 March 2031
General government debt of 40 per cent of GDP by 2030

Show answer

Answer: C. Central government debt of 50 per cent ±1 of GDP by 31 March 2031

The Budget for 2025-26 announced that from 2026-27 the deficit would be set to bring the Centre's debt to 50 per cent ±1 of GDP by 31 March 2031. The 3 per cent deficit and revenue deficit goals belong to earlier versions of the Act, and 40 per cent was the 2018 target for the Centre's own debt, not general government debt.

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Sources

Constitution of India, Articles 112–114, 266, 267, 270 and 293 — https://legislative.gov.in/constitution-of-india/
Fiscal Responsibility and Budget Management Act, 2003, as amended up to the Finance Act, 2018 — https://www.indiacode.nic.in
Ministry of Finance, Union Budget documents and Budget speeches (2017-18, 2021-22, 2025-26, 2026-27) — https://www.indiabudget.gov.in
Reserve Bank of India: agreement on ad hoc treasury bills and ways and means advances (effective 1 April 1997); definitions of deficit indicators — https://www.rbi.org.in