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The Union Budget: fiscal policy, accounts, receipts and expenditure

తెలుగులో వివరణ

Budget and fiscal policy · Part 1 / 2 · Fact-checked on · how we check

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

What fiscal policy is for, what Article 112 requires the annual financial statement to show (charged and voted expenditure), the Consolidated Fund, Public Account and Contingency Fund, the budget documents and the 2017-18 reforms, and how every receipt and every item of spending is classified as revenue or capital.

Each idea is explained first in Telugu (తెలుగు), 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 Telugu and revise it in English.

ప్రతి ఏడాది కేంద్ర ప్రభుత్వం పార్లమెంటుకు ఒక లెక్క చెబుతుంది: ఎంత డబ్బు వస్తుంది, ఎంత ఖర్చు పెడతాం, ఎక్కడ, లోటు వస్తే ఎలా పూడుస్తాం. ఒక ఇంటి పెద్ద ఏడాది మొదట్లో 'జీతం ఇంత, ఖర్చులు ఇవి, చాలకపోతే అప్పు ఇంత' అని రాసుకున్నట్టే. రాజ్యాంగం దీన్ని వార్షిక ఆర్థిక నివేదిక అంటుంది, మనం బడ్జెట్ అంటాం. పన్నులు, ఖర్చు, అప్పుతో ఆర్థిక వ్యవస్థను నడిపించడమే కోశ విధానం. ఈ భాగంలో రాబడి, ఖర్చును రెవెన్యూ, మూలధనం అని రెండుగా ఎలా విభజిస్తారో చూస్తాం. (→ English: fiscal policy · हिन्दी: राजकोषीय नीति)

In exam EnglishEvery year the Union government tells Parliament how much money it expects to collect, how much it plans to spend and on what, and how it will cover any gap. This statement, called the annual financial statement in the Constitution and the Budget in everyday speech, is the main instrument of fiscal policy: the use of government taxing, spending and borrowing to influence the economy. The parliamentary stages of passing the Budget were taught in the Polity chapter on Parliament, and taxes get their own chapter next. This part explains what fiscal policy is for, what the Constitution requires the Budget to show, the three government accounts, the main budget documents, and the two-way split of every receipt and every rupee spent into revenue and capital. Part 2 builds on this split to explain deficits, public debt and the fiscal rules of the FRBM Act.

కోశ విధానానికి మూడు పనులు. ఒకటి: మార్కెట్ సరిగా ఇవ్వలేని రక్షణ, రోడ్లు, ప్రజారోగ్యం వంటివి అందించడం. రెండు: ధనిక, పేదల మధ్య దూరం తగ్గించడం. మూడు: ఆర్థిక వ్యవస్థ ఊపును సమంగా ఉంచడం. ఊరిలో పంట బాగాలేని ఏడాది పంచాయతీ పనులు పెంచి కూలీలకు డబ్బు అందిస్తే కొనుగోళ్లు ఆగవు కదా, అలాగే మందగమనంలో ప్రభుత్వం ఎక్కువ ఖర్చు పెడుతుంది. కొన్ని పనులు ఎవరూ నిర్ణయించకుండానే జరుగుతాయి: ఆదాయం తగ్గితే పన్ను వసూళ్లు తమంతట తామే తగ్గుతాయి. ద్రవ్య విధానం ఆర్‌బీఐది, కోశ విధానం ప్రభుత్వానిది. (→ English: fiscal policy · हिन्दी: राजकोषीय नीति)

In exam EnglishEconomists usually group the jobs of fiscal policy under three heads. Allocation means providing goods the market will not supply well on its own, such as defence, roads or public health. Distribution means narrowing gaps between rich and poor through progressive taxes, subsidies and welfare schemes. Stabilisation means smoothing the business cycle: in a slowdown the government can spend more or tax less (expansionary policy) to support demand, and in an overheating economy it can do the opposite (contractionary policy). Acting against the direction of the cycle is called counter-cyclical policy. Some of this happens without any decision, through automatic stabilisers: in a recession income tax collections fall and welfare payments rise on their own, cushioning household incomes. Fiscal policy is run by the government through Parliament, while monetary policy is run by the RBI through interest rates and liquidity; the two work best when they pull in the same direction.

రాజ్యాంగం 'బడ్జెట్' అనే మాట వాడదు; ఆర్టికల్ 112 దాన్ని వార్షిక ఆర్థిక నివేదిక అంటుంది. ఇందులో రెండు రకాల ఖర్చులు విడిగా చూపాలి. కొన్నింటికి లోక్‌సభ ఓటు కావాలి. మరికొన్ని భారత సంఘటిత నిధి నుంచి నేరుగా వెళ్లే సంఘటిత నిధిపై భారిత వ్యయం: రాష్ట్రపతి జీతభత్యాలు, సుప్రీంకోర్టు న్యాయమూర్తుల జీతాలు, కాగ్ జీతం, అప్పుల వడ్డీ వంటివి. వీటిపై చర్చ జరగవచ్చు కానీ ఓటు ఉండదు. ఎందుకంటే న్యాయమూర్తి జీతం ప్రతి ఏడాది అధికార పక్షం దయపై ఆధారపడితే ఆయన నిర్భయంగా తీర్పు చెప్పగలరా? (→ English: expenditure charged on the Consolidated Fund · हिन्दी: संचित निधि पर भारित व्यय)

In exam EnglishArticle 112 requires the President to cause a statement of the estimated receipts and expenditure of the Government of India for each financial year to be laid before both Houses of Parliament; the Constitution calls this the annual financial statement and never uses the word "budget". The statement must show separately the sums needed to meet expenditure charged on the Consolidated Fund and the sums proposed to be made from the Consolidated Fund of India that need a vote, and it must distinguish expenditure on revenue account from other expenditure. Article 112(3) lists charged items, among them the President's emoluments, the salaries of the presiding officers of both Houses, debt charges, the salaries and pensions of Supreme Court judges, the CAG's salary, and sums needed to satisfy court judgments. Under Article 113(1), charged items are not put to the vote of the Lok Sabha but may be discussed. The reason is independence: offices like the judiciary and the CAG should not depend on a yearly vote of the majority.

కేంద్రం డబ్బంతా మూడు ఖాతాల ద్వారా నడుస్తుంది. భారత సంఘటిత నిధి ప్రధాన ఖజానా: పన్నులు, తీసుకున్న అప్పులు అన్నీ ఇక్కడికే; పార్లమెంటు చట్టం లేకుండా ఒక్క రూపాయి తీయలేరు. భారత ప్రజా ఖాతాలో ప్రభుత్వం సొంతం కాని డబ్బు ఉంటుంది, ఉద్యోగుల పీఎఫ్, చిన్న పొదుపులు వంటివి; బ్యాంకు మన డిపాజిట్ దాచినట్టే. అందుకే దానికి పార్లమెంటు అనుమతి అక్కర్లేదు. భారత ఆగంతుక నిధి రాష్ట్రపతి చేతిలో ఉండే అత్యవసర నిధి: తుపాను వస్తే వెంటనే డబ్బు పంపి, తర్వాత పార్లమెంటు ఆమోదం తీసుకుంటారు. (→ English: Contingency Fund of India · हिन्दी: भारत की आकस्मिकता निधि)

In exam EnglishAll money of the Union flows through three accounts. The Consolidated Fund of India (Article 266(1)) receives all revenues, all loans the government raises and all repayments of loans it has given; nothing can be withdrawn from it except under a law passed by Parliament, which is why an Appropriation Act is needed every year. The Public Account of India (Article 266(2)) holds other public money that the government keeps as a banker or trustee rather than owns, such as provident fund balances and small savings deposits; payments out of it do not need Parliament's appropriation because the money belongs to others. The Contingency Fund of India (Article 267) is a fixed sum placed at the disposal of the President so that urgent, unforeseen spending can be met before Parliament authorises it; the amount drawn is later recouped from the Consolidated Fund. Suppose a cyclone strikes in the middle of the year: the Contingency Fund lets money move at once, and Parliament votes the spending afterwards.

బడ్జెట్ ఒక్క కాగితం కాదు, పత్రాల కట్ట. ఆర్థిక మంత్రి ప్రసంగం విధానాన్ని మాటల్లో చెబుతుంది. ప్రతి మంత్రిత్వ శాఖకు ఒక గ్రాంటు డిమాండ్ ఉంటుంది, లోక్‌సభ దానిపై ఓటు వేస్తుంది. తర్వాత ద్రవ్య వినిమయ బిల్లు ఆ మొత్తాన్ని ఖజానా నుంచి తీసే అనుమతి ఇస్తుంది; పన్ను మార్పులు ఆర్థిక బిల్లులో ఉంటాయి. కోశ బాధ్యత, బడ్జెట్ నిర్వహణ చట్టం ప్రకారం మధ్యకాలిక విధాన నివేదికలు కూడా పెట్టాలి. ఫలితాల బడ్జెట్ 'ఎంత ఖర్చు' కాకుండా 'ఎన్ని బడులు కట్టాం' అని చూపుతుంది; జెండర్ బడ్జెట్ మహిళల కోసం ఖర్చును చూపుతుంది. (→ English: Appropriation Bill · हिन्दी: विनियोग विधेयक)

In exam EnglishThe Budget is not one document but a set. The Finance Minister's Budget speech presents the year's policy in words. The annual financial statement gives the figures required by Article 112. The Demands for Grants, usually one for each ministry or department, are the requests the Lok Sabha votes on under Article 113. Once the demands are voted, the Appropriation Bill (Article 114) authorises withdrawal of the voted amounts and the charged amounts from the Consolidated Fund, while the Finance Bill carries the tax proposals. Explanatory documents such as the Receipt Budget, the Expenditure Budget and Budget at a Glance help readers follow the numbers. Section 3 of the Fiscal Responsibility and Budget Management Act requires further statements to be laid with the Budget, now the Medium-term Fiscal Policy cum Fiscal Policy Strategy Statement and the Macro-economic Framework Statement. Two newer documents look beyond money spent: the Outcome Budget, first presented for 2005-06, ties outlays to measurable results, and the Gender Budget Statement, also from 2005-06, shows spending meant to benefit women.

2017-18 బడ్జెట్ నుంచి మూడు మార్పులు. ఒకటి: బడ్జెట్‌ను ఫిబ్రవరి చివర కాకుండా ఫిబ్రవరి 1నే ప్రవేశపెడుతున్నారు. ఏప్రిల్ 1 నాటికే ఆమోదం వస్తే శాఖలు డబ్బు కోసం ఎదురు చూడక్కర్లేదు; ముందు అయితే రెండు నెలల ఖర్చు కోసం ఓట్ ఆన్ అకౌంట్ తీసుకోవాల్సి వచ్చేది. రెండు: 1924 నుంచి వేరుగా ఉన్న రైల్వే బడ్జెట్‌ను సాధారణ బడ్జెట్‌లో కలిపేశారు. మూడు: ప్రణాళిక, ప్రణాళికేతర విభజన తీసేశారు; కొత్త భవనం కడతారు కానీ పాత భవనానికి రంగు వేయరు అన్న సమస్య దానివల్లే. ఇప్పుడు రెవెన్యూ, మూలధనం మాత్రమే. (→ English: vote on account · हिन्दी: लेखानुदान)

In exam EnglishThree changes made from the Budget for 2017-18 still shape exam questions. First, the Budget is now presented on 1 February instead of the last working day of February, so that Parliament can pass the Appropriation and Finance Bills before the financial year begins on 1 April; earlier, a vote on account was routinely needed to keep money flowing in April and May, and ministries lost the first months of the year waiting for funds. Second, the Railway Budget, presented separately since 1924, was merged into the Union Budget, so railway spending is now one of the Demands for Grants. Third, the old split of spending into plan and non-plan was dropped, because it encouraged neglect of maintenance (counted as non-plan) in favour of new projects (counted as plan); spending is now classified only as revenue or capital. The financial year itself still runs from 1 April to 31 March.

ప్రతి రాబడికి ఒక్కటే పరీక్ష: దీనివల్ల ప్రభుత్వానికి అప్పు పెరుగుతుందా, లేదా ఆస్తి తగ్గుతుందా? రెండూ కాకపోతే అది రెవెన్యూ రాబడులు. ఒక రైతుకు పంట అమ్మకం డబ్బు, పొలం కౌలు డబ్బు ఎలాగో, ప్రభుత్వానికి పన్నులు అలా. ఆదాయపు పన్ను, జీఎస్టీ, కస్టమ్స్ పన్ను రాబడి; అందులో ఆర్థిక సంఘం సిఫార్సు ప్రకారం రాష్ట్రాల వాటా పోగా మిగిలేది కేంద్రం నికర పన్ను. పన్నేతర రాబడి: ఇచ్చిన అప్పులపై వడ్డీ, ప్రభుత్వ సంస్థల డివిడెండ్, ఆర్‌బీఐ మిగులు, ఫీజులు, స్పెక్ట్రమ్ డబ్బు. ఇవేవీ తిరిగి ఇవ్వనక్కర్లేదు. (→ English: revenue receipts · हिन्दी: राजस्व प्राप्तियाँ)

In exam EnglishEvery receipt is sorted by one test: does it create a liability for the government or reduce its assets? If neither, it is one of the revenue receipts. These have two parts. Tax revenue covers income tax, corporation tax, GST, customs and excise duties; the Budget first shows gross tax revenue and then subtracts the states' share, because under Article 270 a part of the Union's taxes is divided with the states on the recommendation of the Finance Commission. What remains is the Centre's net tax revenue. Non-tax revenue covers interest the Centre earns on loans it has given, dividends and profits from public sector enterprises and public sector banks, the surplus the RBI transfers each year, fees and fines, receipts from spectrum and other communication services, and grants received from abroad. None of these has to be paid back, and none reduces what the government owns.

మూలధన రాబడులు అంటే అప్పు పెరిగేవి లేదా ఆస్తి తగ్గేవి. పెద్ద భాగం అప్పులే: మార్కెట్లో ప్రభుత్వ బాండ్లు అమ్మడం, ట్రెజరీ బిల్లులు, మనం పోస్టాఫీసులో దాచే చిన్న పొదుపులు, విదేశీ అప్పులు. అప్పు కాని మూలధన రాబడులు కూడా ఉన్నాయి: ఇచ్చిన అప్పుల వసూలు, పెట్టుబడుల ఉపసంహరణ అంటే ప్రభుత్వ సంస్థల్లో వాటాలు అమ్మడం. ఒక ఆవు ఉదాహరణ: ఆవు పాలు అమ్మితే వచ్చేది రాబడి, ఆవు ఉంటుంది. ఆవునే అమ్మితే డబ్బు వస్తుంది కానీ ఆస్తి పోయింది; అది మూలధన రాబడి. (→ English: capital receipts · हिन्दी: पूँजीगत प्राप्तियाँ)

In exam Englishcapital receipts are the opposite case: either the government takes on a liability, or it gives up an asset. The biggest part is debt. The Centre borrows from the market by selling dated government securities, raises short-term money through treasury bills, receives funds from the National Small Savings Fund (the savings people put in schemes such as post office deposits are lent on to the government), and takes loans from abroad. Smaller but important are non-debt capital receipts: recoveries of loans the Centre had given to states and public bodies, and disinvestment, the sale of the government's shares in public sector enterprises. A simple example shows the test at work. If a public sector company pays the government a dividend, nothing is given up, so it is a revenue receipt. If the government sells part of its stake in the same company, it now owns less, so the money is a capital receipt, even though cash comes in either way.

ఖర్చుకు అద్దం లాంటి పరీక్ష: దీనివల్ల ఆస్తి వస్తుందా, లేదా అప్పు తగ్గుతుందా? రాకపోతే అది రెవెన్యూ వ్యయం, అంటే ఇల్లు నడపడానికి నెలనెలా అయ్యే ఖర్చు లాంటిది. పాత అప్పులపై వడ్డీ (కేంద్రం ఖర్చులో అతి పెద్ద అంశం), ఆహార, ఎరువుల సబ్సిడీ, జీతాలు, పింఛన్లు, రాష్ట్రాలకు ఇచ్చే సహాయక గ్రాంట్లు. ఇక్కడ ఒక చిక్కు: కేంద్రం గ్రాంటు ఇస్తే రాష్ట్రం దానితో బడి కట్టినా, ఆ బడి కేంద్రం ఆస్తి కాదు. కాబట్టి కేంద్రం లెక్కలో అది రెవెన్యూ ఖర్చే. (→ English: revenue expenditure · हिन्दी: राजस्व व्यय)

In exam EnglishSpending is sorted by the mirror test: does it create an asset or reduce a liability? If not, it is revenue expenditure, the cost of running the government and delivering services year after year. The main items are interest on past borrowing, which is the largest single item of the Centre's spending, subsidies on food, fertilisers and fuel, salaries, pensions, the running costs of defence, and grants to states and Union territories. The last item hides an important catch. When the Centre gives grants-in-aid to a state, the money leaves the Centre's books for good and creates no asset that the Centre owns, so it is counted as revenue expenditure even if the state uses it to build schools, roads or houses. This is why a part of what looks like consumption spending in the Union Budget is in fact building assets in the states, and part 2 shows how the effective revenue deficit was designed to correct for it.

మూలధన వ్యయం అంటే ఆస్తి సృష్టించే లేదా అప్పు తగ్గించే ఖర్చు: హైవేలు, రైలు మార్గాలు, ఓడరేవులు, సైనిక సామగ్రి, రాష్ట్రాలకు ఇచ్చే అప్పులు (అవి తిరిగి వస్తాయి కాబట్టి ఆస్తి), ప్రభుత్వ సంస్థల్లో వాటాలు, పాత అప్పు అసలు తీర్చడం. ఒక కుటుంబం అప్పు చేసి ట్రాక్టర్ కొంటే రేపు సంపాదన పెరుగుతుంది; అదే అప్పుతో పెళ్లి విందు చేస్తే అప్పు మాత్రమే మిగులుతుంది. అందుకే ఖర్చు ఎంత అన్నదే కాదు, దేనికి అన్నదీ ముఖ్యం. 2026-27 బడ్జెట్‌లో కేంద్రం మూలధన వ్యయం సుమారు ₹12.2 లక్షల కోట్లు. (→ English: capital expenditure · हिन्दी: पूँजीगत व्यय)

In exam Englishcapital expenditure is spending that either creates an asset or reduces a liability. It includes building highways, railway lines and ports, buying military equipment, giving loans and advances to states and public enterprises (the loan is an asset because it will be repaid), putting equity into public sector companies, and repaying the principal of past debt. Governments and markets watch this category closely because it adds to the economy's capacity to produce in future, and because a rupee of public investment is generally expected to raise output by more than a rupee of routine revenue spending, partly by drawing in private investment alongside it. That is why the quality of spending matters as much as its size: a deficit used to build a port is easier to justify than one used to pay interest. The Union Budget for 2026-27 placed the Centre's capital expenditure at about ₹12.2 lakh crore. The table below applies both tests to common items.
Applying the two tests: how common budget items are classified
ItemClassified asWhy
Income tax, GST, customs dutyRevenue receipt (tax)No liability, no asset given up
Dividend from a public sector company; RBI surplusRevenue receipt (non-tax)Earned; nothing given up
Spectrum auction proceedsRevenue receipt (non-tax)Shown under communication services
Sale of shares in a public sector companyCapital receipt (non-debt)Government gives up part of an asset
Recovery of a loan given to a stateCapital receipt (non-debt)An asset (the loan) is reduced
Market borrowing, treasury bills, small savingsCapital receipt (debt)Creates a liability
Interest on past debt; subsidies; salaries; pensionsRevenue expenditureNo asset created
Grant to a state, even for building schoolsRevenue expenditureNo asset owned by the Centre
Loan to a state; equity in a public companyCapital expenditureCreates a financial asset
Building a highway; buying defence equipmentCapital expenditureCreates a physical asset
Repayment of the principal of a loanCapital expenditureReduces a liability

మొత్తం మీద బడ్జెట్ నాలుగు గడుల పట్టిక. రెవెన్యూ రాబడులు, రెవెన్యూ ఖర్చు ప్రతి ఏడాదీ వచ్చిపోతాయి, ఆస్తి-అప్పుల్లో మార్పు తేవు. మూలధన రాబడులు, మూలధన ఖర్చు ఆస్తి-అప్పులను మారుస్తాయి. ఇంటి లెక్కలో జీతం, కిరాణా ఖర్చు ఒక వైపు; ఇంటి కోసం లోన్, ఇల్లు కట్టడం మరో వైపు ఉన్నట్టే. ఖర్చు, అప్పు కాని రాబడుల కంటే ఎక్కువైతే ఆ తేడాను అప్పుగా తేవాలి; అదే ద్రవ్య లోటు. అది తదుపరి భాగం. (→ English: fiscal deficit · हिन्दी: राजकोषीय घाटा)

In exam EnglishPut together, the Budget is a grid of four boxes: revenue receipts and revenue expenditure, which recur every year and leave no lasting change in what the government owns or owes, and capital receipts and capital expenditure, which change its assets and liabilities. The Constitution supplies the frame (Article 112, the three accounts, charged and voted sums), the budget documents supply the detail, and the two tests sort every entry. The gaps between these boxes are what the next part measures. When total spending exceeds revenue receipts plus non-debt capital receipts, the difference has to be borrowed, and that borrowing is the fiscal deficit. How large that gap may be, how it is financed and what limits the law places on it are the questions of part 2, and the taxes that fill the revenue box are the subject of the chapter on taxation and GST.

Exam traps

Recap

Practice questions

Q1. Which one of the following is a capital receipt in the Union Budget?

  1. Dividends received from public sector enterprises
  2. Proceeds from the sale of government shares in a public sector enterprise
  3. Interest received on loans given to states
  4. Surplus transferred by the Reserve Bank of India
Show answer

Answer: B. Proceeds from the sale of government shares in a public sector enterprise

Selling shares reduces an asset the government owns, so disinvestment is a non-debt capital receipt. Dividends, interest on loans to states and the RBI surplus are all earned without giving up an asset or taking on a liability, so they are non-tax revenue receipts.

Q2. Consider the following statements:
1. Expenditure charged on the Consolidated Fund of India cannot be discussed in Parliament.
2. The salary of the Comptroller and Auditor General of India is charged on the Consolidated Fund of India.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: B. 2 only

Statement 1 is wrong: under Article 113(1) charged items are not put to the vote, but they may be discussed. Statement 2 is right: Article 112(3) lists the CAG's salary among charged items. So '1 only', 'both' and 'neither' are wrong.

Q3. Which one of the following is classified as revenue expenditure of the Union government?

  1. A loan given to a state government for an irrigation project
  2. Repayment of the principal of an external loan
  3. A grant given to a state government to build hospitals
  4. Equity investment in a public sector bank
Show answer

Answer: C. A grant given to a state government to build hospitals

A grant leaves the Centre's books and creates no asset the Centre owns, so it is revenue expenditure even if hospitals are built. A loan to a state creates a financial asset, repaying principal reduces a liability, and equity investment creates an asset; all three are capital expenditure.

Q4. Match List I with List II:
List I
A. Consolidated Fund of India
B. Public Account of India
C. Contingency Fund of India
D. Annual financial statement
List II
1. Article 112
2. Article 266(1)
3. Article 266(2)
4. Article 267
Select the correct answer using the code given below:

  1. A-2, B-3, C-4, D-1
  2. A-3, B-2, C-4, D-1
  3. A-2, B-4, C-3, D-1
  4. A-1, B-3, C-4, D-2
Show answer

Answer: A. A-2, B-3, C-4, D-1

The Consolidated Fund is Article 266(1), the Public Account 266(2), the Contingency Fund 267 and the annual financial statement 112. The second code swaps the two parts of Article 266; the third puts the Public Account under 267; the fourth gives the annual financial statement's article to the Consolidated Fund.

Q5. With reference to changes made in the Union Budget from 2017-18, consider the following statements:
1. The Budget began to be presented on 1 February.
2. The Railway Budget was merged with the Union Budget.
3. The classification of expenditure into revenue and capital was abolished.
How many of the above statements are correct?

  1. Only one
  2. Only two
  3. All three
  4. None
Show answer

Answer: B. Only two

Statements 1 and 2 are correct. Statement 3 is wrong: it was the plan and non-plan classification that ended; the revenue and capital split is required by Article 112 and remains. So 'only one', 'all three' and 'none' are wrong.

Q6. During a sharp economic slowdown, which one of the following would be an expansionary fiscal policy response?

  1. Raising income tax rates to reduce the deficit
  2. Increasing public spending on infrastructure
  3. Raising the cash reserve ratio
  4. Cutting welfare spending to build a budget surplus
Show answer

Answer: B. Increasing public spending on infrastructure

More public spending adds to demand, which is the expansionary, counter-cyclical response. Raising taxes and cutting welfare spending reduce demand and are contractionary. Raising the CRR is a monetary policy tool of the RBI, not fiscal policy, and it is contractionary too.

Q7. Consider the following statements:
1. Money can be paid out of the Public Account of India only after an appropriation by Parliament.
2. Provident fund balances and small savings deposits held by the government form part of the Public Account of India.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: B. 2 only

Statement 1 is wrong: the Public Account holds money the government keeps as banker or trustee, so payments from it need no appropriation; that requirement applies to the Consolidated Fund. Statement 2 is right. So '1 only', 'both' and 'neither' are wrong.

Q8. Consider the following statements:
1. The Outcome Budget links budgetary outlays to measurable results.
2. The Gender Budget Statement was first presented with the Union Budget for 2005-06.
3. The FRBM Act requires a Macro-economic Framework Statement to be laid before Parliament along with the Budget.
How many of the above statements are correct?

  1. Only one
  2. Only two
  3. All three
  4. None
Show answer

Answer: C. All three

All three are correct: the Outcome Budget ties outlays to outcomes, the Gender Budget Statement dates from 2005-06, and section 3 of the FRBM Act requires the Macro-economic Framework Statement with the Budget. So 'only one', 'only two' and 'none' are wrong.

All partsNext: Part 2 →

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