Fiscal Policy & Budget PYQs

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1. Prelims 2026Q59Fiscal Policy & Budget

   Which one of the following best describes the ‘Crowding Out Effect’ in the context of fiscal policy ?

   aA situation where private investment increases due to increased Government spendingbA situation where Government borrowing leads to higher interest rates, which reduces private investmentcA situation where an increase in taxes leads to increased private sector investmentdA situation where Government spending has no impact on aggregate demand
2. Prelims 2025Q10Fiscal Policy & Budget

   Consider the following statements :

   I.Capital receipts create a liability or cause a reduction in the assets of the Government.

   II.Borrowings and disinvestment are capital receipts.

   III.Interest received on loans creates a liability of the Government.

   Which of the statements given above are correct?

   aI and II onlybII and III onlycI and III onlydI, II and III
3. Prelims 2025Q61Fiscal Policy & Budget

   Suppose the revenue expenditure is ₹ 80,000 crores and the revenue receipts of the Government are ₹ 60,000 crores. The Government budget also shows borrowings of ₹ 10,000 crores and interest payments of ₹ 6,000 crores. Which of the following statements are correct?

   I.Revenue deficit is ₹ 20,000 crores.

   II.Fiscal deficit is ₹ 10,000 crores.

   III.Primary deficit is ₹ 4,000 crores.

   Select the correct answer using the code given below.

   aI and II onlybII and III onlycI and III onlydI, II and III
4. Prelims 2025Q65Fiscal Policy & Budget

   A country's fiscal deficit stands at ₹ 50,000 crores. It is receiving ₹ 10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹ 1,500 crores. What is the gross primary deficit?

   a₹ 48,500 croresb₹ 51,500 croresc₹ 58,500 croresdNone of the above
5. Prelims 2025Q66Fiscal Policy & Budget

   Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct?

   I.It has recommended grants of ₹ 4,800 crores from the year 2022–23 to the year 2025–26 for incentivizing States to enhance educational outcomes.

   II.45% of the net proceeds of Union taxes are to be shared with States.

   III.₹ 45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms.

   IV.It reintroduced tax effort criteria to reward fiscal performance.

   Select the correct answer using the code given below.

   aI, II and IIIbI, II and IVcI, III and IVdII, III and IV
6. Prelims 2024Q85Fiscal Policy & BudgetAnswer disputed

   With reference to Union Budget, consider the following statements :

   1.The Union Finance Minister on behalf of the Prime Minister lays the Annual Financial Statement before both the Houses of Parliament.

   2.At the Union level, no demand for a grant can be made except on the recommendation of the President of India.

   Which of the statements given above is/are correct ?

   a1 onlyb2 onlycBoth 1 and 2dNeither 1 nor 2
7. Prelims 2023Q29Fiscal Policy & Budget

   Consider the following :

   1.Demographic performance

   2.Forest and ecology

   3.Governance reforms

   4.Stable government

   5.Tax and fiscal efforts For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?

   aOnly twobOnly threecOnly fourdAll five
8. Prelims 2022Q10Fiscal Policy & Budget

   With reference to the Indian economy, consider the following statements :

   1.A share of the household financial savings goes towards government borrowings.

   2.Dated securities issued at market-related rates in auctions form a large component of internal debt.

   Which of the above statements is/are correct ?

   a1 onlyb2 onlycBoth 1 and 2dNeither 1 nor 2
9. Prelims 2021Q3Fiscal Policy & Budget

   Which among the following steps is most likely to be taken at the time of an economic recession?

   aCut in tax rates accompanied by increase in interest ratebIncrease in expenditure on public projectscIncrease in tax rates accompanied by reduction of interest ratedReduction of expenditure on public projects
10. Prelims 2020Q6Fiscal Policy & Budget

    Along with the Budget, the Finance Minister also places other documents before the Parliament which include ‘The Macro Economic Framework Statement’. The aforesaid document is presented because this is mandated by

    aLong standing parliamentary conventionbArticle 112 and Article 110(1) of the Constitution of IndiacArticle 113 of the Constitution of IndiadProvisions of the Fiscal Responsibility and Budget Management Act, 2003
11. Prelims 2018Q9Fiscal Policy & Budget

    Consider the following statements :

    1.The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.

    2.The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.

    3.As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter.

    Which of the statements given above is/are correct ?

    a1 onlyb2 and 3 onlyc1 and 3 onlyd1, 2 and 3
12. Prelims 2018Q47Fiscal Policy & Budget

    If a commodity is provided free to the public by the Government, then

    athe opportunity cost is zero.bthe opportunity cost is ignored.cthe opportunity cost is transferred from the consumers of the product to the tax-paying public.dthe opportunity cost is transferred from the consumers of the product to the Government.
13. Prelims 2017Q94Fiscal Policy & Budget

    Consider the following statements :

    1.Tax revenue as a percent of GDP of India has steadily increased in the last decade.

    2.Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.

    Which of the statements given above is/are correct ?

    a1 onlyb2 onlycBoth 1 and 2dNeither 1 nor 2
14. Prelims 2016Q3Fiscal Policy & Budget

    There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?

    1.Reducing revenue expenditure

    2.Introducing new welfare schemes

    3.Rationalizing subsidies

    4.Reducing import duty

    Select the correct answer using the code given below.

    a1 onlyb2 and 3 onlyc1 and 3 onlyd1, 2, 3 and 4
15. Prelims 2016Q12Fiscal Policy & Budget

    Which of the following is/are included in the capital budget of the Government of India?

    1.Expenditure on acquisition of assets like roads, buildings, machinery, etc.

    2.Loans received from foreign governments

    3.Loans and advances granted to the States and Union Territories

    Select the correct answer using the code given below.

    a1 onlyb2 and 3 onlyc1 and 3 onlyd1, 2 and 3
16. Prelims 2015Q2Fiscal Policy & Budget

    With reference to the Fourteenth Finance Commission, which of the following statements is/are correct?

    1.It has increased the share of States in the central divisible pool from 32 percent to 42 percent.

    2.It has made recommendations concerning sector-specific grants.

    Select the correct answer using the code given below.

    a1 onlyb2 onlycBoth 1 and 2dNeither 1 nor 2
17. Prelims 2015Q60Fiscal Policy & Budget

    With reference to the Union Government, consider the following statements :

    1.The Department of Revenue is responsible for the preparation of Union Budget that is presented to the Parliament.

    2.No amount can be withdrawn from the Consolidated Fund of India without the authorization from the Parliament of India.

    3.All the disbursements made from Public Account also need the authorization from the Parliament of India.

    Which of the statements given above is/are correct?

    a1 and 2 onlyb2 and 3 onlyc2 onlyd1, 2 and 3
18. Prelims 2015Q98Fiscal Policy & Budget

    There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?

    1.Reducing revenue expenditure

    2.Introducing new welfare schemes

    3.Rationalizing subsidies

    4.Expanding industries

    Select the correct answer using the code given below.

    a1 and 3 onlyb2 and 3 onlyc1 onlyd1, 2, 3 and 4
19. Prelims 2014Q100Fiscal Policy & Budget

    With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure?

    1.Defence expenditure

    2.Interest payments

    3.Salaries and pensions

    4.Subsidies

    Select the correct answer using the code given below.

    a1 onlyb2 and 3 onlyc1, 2, 3 and 4dNone
20. Prelims 2013Q44Fiscal Policy & Budget

    In India, deficit financing is used for raising resources for

    aeconomic developmentbredemption of public debtcadjusting the balance of paymentsdreducing the foreign debt
21. Prelims 2012Q33Fiscal Policy & Budget

    Which of the following is/are among the noticeable features of the recommendations of the Thirteenth Finance Commission?

    1.A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design

    2.A design for the creation of lakhs of jobs in the next ten years in consonance with India's demographic dividend

    3.Devolution of a specified share of central taxes to local bodies as grants

    Select the correct answer using the codes given below :

    a1 onlyb2 and 3 onlyc1 and 3 onlyd1, 2 and 3
22. Prelims 2011Q8Fiscal Policy & Budget

    Which one of the following statements appropriately describes the “fiscal stimulus”?

    aIt is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growthbIt is an intense affirmative action of the Government to boost economic activity in the countrycIt is Government’s intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflationdIt is an extreme affirmative action by the Government to pursue its policy of financial inclusion
23. Prelims 2011Q37Fiscal Policy & Budget

    All revenues received by the Union Government by way of taxes and other receipts for the conduct of Government business are credited to the

    aContingency Fund of IndiabPublic AccountcConsolidated Fund of IndiadDeposits and Advances Fund
24. Prelims 2011Q74Fiscal Policy & Budget

    What is the difference between "vote-on-account" and "interim budget"?

    1.The provision of a "vote-on-account" is used by a regular Government, while an "interim budget" is a provision used by a caretaker Government.

    2.A "vote-on-account" only deals with the expenditure in Government's budget, while an "interim budget" includes both expenditure and receipts.

    Which of the statements given above is/are correct?

    a1 onlyb2 onlycBoth 1 and 2dNeither 1 nor 2
25. Prelims 2010Q26Fiscal Policy & Budget

    Which one of the following was NOT stipulated in the Fiscal Responsibility and Budget Management Act, 2003?

    aElimination of revenue deficit by the end of the fiscal year 2007-08bNon-borrowing by the Central Government from Reserve Bank of India except under certain circumstancescElimination of primary deficit by the end of the fiscal year 2008-09dFixing government guarantees in any financial year as a percentage of GDP
26. Prelims 2010Q67Fiscal Policy & BudgetAnswer disputed

    In the context of governance, consider the following :

    1.Encouraging Foreign Direct Investment inflows

    2.Privatization of higher educational Institutions

    3.Down-sizing of bureaucracy

    4.Selling/off-loading the shares of Public Sector Undertakings

    Which of the above can be used as measures to control the fiscal deficit in India ?

    a1, 2 and 3b2, 3 and 4c1, 2 and 4d3 and 4 only
27. Prelims 2010Q77Fiscal Policy & Budget

    Which one of the following is responsible for the preparation and presentation of Union Budget to the Parliament?

    aDepartment of RevenuebDepartment of Economic AffairscDepartment of Financial ServicesdDepartment of Expenditure
28. Prelims 2010Q79Fiscal Policy & Budget

    Consider the following actions by the Government:

    1.Cutting the tax rates

    2.Increasing the government spending

    3.Abolishing the subsidies In the context of economic recession, which of the above actions can be considered a part of the "fiscal stimulus" package?

    a1 and 2 onlyb2 onlyc1 and 3 onlyd1, 2 and 3
29. Prelims 2006Q24Fiscal Policy & Budget

    Which one of the following statements is correct?

    Fiscal Responsibility and Budget Management Act (FRBMA) concerns

    afiscal deficit onlybrevenue deficit onlycboth fiscal and revenue deficitdneither fiscal deficit nor revenue deficit
30. Prelims 2004Q1Fiscal Policy & Budget

    With reference to Indian Public Finance, consider the following statements:

    1.Disbursements from Public Accounts of India are subject to the Vote of Parliament.

    2.The Indian Constitution provides for the establishment of a Consolidated Fund, a Public Account and a Contingency Fund for each State.

    3.Appropriations and disbursements under the Railway Budget are subject to the same form of Parliamentary control as other appropriations and disbursements.

    Which of these statements given above are correct?

    a1 and 2b2 and 3c1 and 3d1, 2 and 3