Government budgeting and Fiscal Policy MCQ Quiz - Objective Question with Answer for Government budgeting and Fiscal Policy - Download Free PDF

The correct answer is 13%.

Key Points

• The Gross State Domestic Product (GSDP) of Uttar Pradesh for 2023-24 (at current prices) is projected to be Rs 24,39,171 crore, amounting to growth of 19% over 2022-23.
• Expenditure (excluding debt repayment) in 2023-24 is estimated to be Rs 6,59,061 crore, an increase of 17% over the revised estimates of 2022-23. 
• Uttar Pradesh’s expenditure in 2023-24 on six key sectors as a proportion of its total expenditure on all sectors. 
  • allocated 13% of its expenditure on education in 2023-24. This is lower than the average allocation for education by states in 2022-23 (14.8%).
  • allocated 7.3% of its total expenditure towards health, which is higher than the average allocation for health by states (6.3%).
  • allocated 5% of its expenditure on rural development. This is lower than the average allocation for rural development by states (5.7%).
  • allocated 4.4% of its expenditure towards urban development.  This is higher than the average allocation towards urban development by states (3.5%).
  • allocated 2.9% of its total expenditure towards agriculture, which is about half the average expenditure on police by states (5.8%).
  • allocated 6.7% of its total expenditure towards energy, which is higher than the average allocation by states (4.8%).

The correct answer is $1 Trillion.

In News

• Blueprint for a $1-trillion Uttar Pradesh economy in 5 years is ready

Key Points

• CM Yogi Adityanath: "UP will accomplish USD 1 trillion objective with appropriate policies and perfect implementation."
• The chief minister stated that the state's GDP is expected to be more than Rs 25.55 lakh crore in 2023–24.
• The state's total GDP, which was Rs 16.45 lakh crore in 2021–22, has now increased to over Rs 22.58 lakh crore in 2022–23.
• With a 9.2 percent contribution to the national income, Uttar Pradesh has emerged as the nation's second largest economy and is crucial to the nation's growth.

The correct answer is 1860.

Key Points

• In 1860, the British government formally introduced the budget to India.
• James Wilson delivered the first Indian Budget on February 18, 1869. Wilson founded The Economist and served as the finance member of the India Council, which provided advice to the viceroy of India.
  • Karl Marx referred to him, Wilson, as an "economical mandarin of great standing."
  • However, he was also primarily self-taught and had previously worked in his family's business of creating and selling hats.
  • His success as a scholar and writer was partly attributed to his intelligence and expertise in economics and business.
• Between 1947 and 1949, R K Shanmukhan Chetty was the finance minister in Jawaharlal Nehru's Cabinet. Chetty presented the first independent India budget on November 26, 1947.

The correct answer is It is her 8th budget

In News

• The Union Budget of India is an annual financial statement set by the Ministry of Finance, covering the financial year starting April 1.

Key Points

• It outlines the planned government spending and expected revenue for the year, based on inputs from the Department of Revenue and the Department of Expenditure.
• Traditionally presented on the last working day of February, it is now presented on February 1 to ensure it is implemented by the start of the financial year.
• The Finance bill and the Appropriation bill are crucial; the latter must be passed by the Lok Sabha for the budget to take effect.
• The Rail Budget, previously presented separately for 92 years, has been merged with the Union Budget since 2017.
• Since India's independence in 1947, there have been 73 annual budgets, 14 interim budgets, and four special budgets.

Additional Information

• Union Minister for Finance and Corporate Affairs Smt Nirmala Sitharaman presented Union Budget 2025-26 in the Parliament.
• The highlights of the budget are as follows:
  • Budget Estimates 2025-26
    • The total receipts other than borrowings and the total expenditure are estimated at ₹ 34.96 lakh crore and ₹ 50.65 lakh crore respectively.
    • The net tax receipts are estimated at ₹ 28.37 lakh crore.
    • The fiscal deficit is estimated to be 4.4 per cent of GDP.
    • The gross market borrowings are estimated at ₹ 14.82 lakh crore.
    • Capex Expenditure of ₹11.21 lakh crore (3.1% of GDP) earmarked in FY2025-26.

The correct answer is When the revenue collected exceeds the required expenditure.

Key Points

• A budget surplus occurs when receipts exceed expenditures.
• The term often refers to a government's financial state, as individuals have "savings" rather than a "budget surplus".
• A surplus is an indication that a government's finances are being effectively managed.
• A surplus implies the government has extra funds.
• Advantages of a budget surplus:
  • These funds can be allocated toward public debt, which reduces interest rates and helps the economy.
  • A budget surplus can be used to reduce taxes, start new programs, or fund existing programs such as Social Security or Medicare.
  • The government might use a budget surplus to cut taxes to stimulate the supply-side of the economy.

The correct answer is Union Budget 2021-22.

Key Points

• On 1 February 2021, Finance Minister Nirmala Sitharaman presented the first paperless budget. This was done due to the ongoing COVID-19 pandemic in India.
• The Union Budget 2021 was presented in a digital format for the first time to promote the Government of India's (GoI) Digital India flagship programme.

Additional Information

• The Union Budget of India also referred to as the Annual Financial Statement in Article 112 of the Constitution of India, is the annual budget of the Republic of India.
• The Government presents it on the first day of February so that it could be materialized before the beginning of the new financial year in April.
• Until 2016 it was presented on the last working day of February by the Finance Minister in Parliament.
• The budget division of the department of economic affairs (DEA) in the finance ministry is the nodal body responsible for producing the budget.
• It is presented by means of the Finance Bill and the Appropriation bill has to be passed by Lok Sabha before it can come into effect on 1 April, the start of India's financial year.
• Since 1947, there have been a total of 73 annual budgets, 14 interim budgets, and four special budgets, or mini-budgets.

The correct answer is Fiscal Policy.

Key Points

• Fiscal Policy deals with the taxation and expenditure decisions of the Government.

Additional InformationMonetary policy & Fiscal Policy

• Monetary policy and fiscal policy are two different tools that have an impact on the economic activity of a country.
• Monetary policies are formed and managed by the central banks of a country and such a policy is concerned with the management of money supply and interest rates in an economy.
• Fiscal policy is related to the way a government is managing the aspects of spending and taxation.
• It is the government’s way of stabilising the economy and helping in the growth of the economy.
• Governments can modify the fiscal policy by bringing in measures and changes in tax rates to control the fiscal deficit of the economy.

The correct answer is Wealth tax.

The Correct answer is Subsidies (9%).Important Points

• ​The outlay for the budget 2023-24 is given as below. 
• In 2023-24 budget the Subsidies part got around 7%. Hence the Option 3 is Incorrect.​

The correct answer is Progressive tax.

Key Points

• Progressive Tax
  • In progressive taxation, the tax liability increases with individual or entity income.
  • This is based on the principle of ability to pay.
  • Under this system, the lowest income people are generally exempted while the highest income people pay the highest taxes.
  • Income Tax is thus an example of a progressive tax.
  • Progressive taxation results in the redistribution of income from rich to poor.
  • A progressive tax charges a higher tax rate for people who earn a higher income. 

Additional Information

• Proportional Tax
  • In this system, a flat tax is levied regardless of income or wealth.
  • One example of corporation tax in India whereby government charges a flat rate of 30% on the income earned by the companies in India.
• Regressive Tax
  • A regressive tax is when the tax rate decreases as the amount subject to taxation increases; the tax rate progresses from high to low.
  • The lowest amount is subject to higher taxation and this leads to individuals with low income bearing the highest-burden of regressive taxes.
  • Such tax does not take into account the ability to pay.
• Pay-roll tax:
  • The tax that is withheld, charged, or levied on an employer's payroll is known as payroll tax.
  • Wages, gross salary, incentives, and any other type of remuneration paid to employees shall be included.
  • Payroll taxes are taxes that an employer is compelled to pay or withhold on behalf of his or her employees.

The correct answer is Finance Minister.

Key Points

• GST Council is the governing body of GST with 33 members.
• Goods and Service Tax Council (GST) of India is headed by the union finance minister.
• The GST Council's first chairman was Arun Jaitley.
• The GST council is currently chaired by Union Finance Minister Nirmala Sitharaman.
• The GST council is established under Article 279 A of the Indian constitution.

Important Points

• Under GST present goods and services are taxed at 0%, 5%, 12%, 18% & 28%.
• GST (Goods and Services Tax) is an indirect tax in India that applies to the manufacture, sale, and consumption of goods and services.
• In India, the Goods and Services Tax (GST) went into effect on July 1, 2017.
• As part of the 101st Amendment, the GST was enacted.
• The state of Assam was the first to approve the GST bill.
• Odisha is the 16th state to vote in favor of the GST bill.
• GST implementation needs the assent of 16 states.

The correct answer is option 2, i.e. Budgeting.

• The budget is prepared by the Department of Economic Affairs of the Ministry of Finance.
• The head of the committee is Finance minister, part of the executive.
• Budget is the 'annual financial statement' which includes estimated receipts and expenditures of the Government of India.
• Parliament controls over the executive in financial matters though - 
  • control before the appropriation of grants through the enactment of the budget (Passing of Budget).
  • control after the enactment through financial committees.
• The primary function of the legislature is to make laws.
  • It has exclusive powers to make laws. (Union list, state list and concurrent list)

The correct answer is Corporate Tax.

Key Points

• Corporate tax is the single largest source of income to the government of India.
• According to the Budget for 2019-20 presented in Parliament by Finance Minister Nirmala Sitharaman, Goods and Services Tax collections will contribute 19 paise in every rupee revenue.
• Corporation tax is the single largest source of income, contributing 21 paise to each rupee earned.

Important Points

• Taxes are generally an involuntary fee levied on individuals and corporations by the government to finance government activities.
• There are two types of Taxes in India- Direct Tax and Indirect Tax.
• Direct Tax
  • The tax that is levied by the government directly on the individuals or corporations is called Direct Taxes.
  • Income Tax, Corporation/Municipal Tax and Wealth Tax are some of the examples of Direct Tax.
  • They are progressive in nature.
• Indirect Tax
  • The tax that is levied by the government on one entity (Manufacturer of goods), but is passed on to the final customer by the manufacturer.
  • VAT, Service tax, GST, Excise duty, entertainment tax and Customs Duty are some of the examples of Indirect Tax.
  • They are regressive in nature.
• Corporate tax is the single largest source of revenue for the government of India. In the year 2023-24, the Indian government is estimated to receive ₹2.5 trillion in revenue from corporate tax, which accounts for about 40% of total tax revenue. Corporate tax rates vary depending on the amount of income and profits made by companies.

The correct answer is 15 paisa.

Key Points

• As per the Union Budget presented in Parliament by Finance Minister Nirmala Sitharaman Goods and Services Tax (GST) will contribute 17 paise in every rupee of revenue, while corporation tax will account for 15 paise.
• The Union Budget for FY 2023-24 this year aims to further strengthen India's economic status.
• In the 75th Year of India's Independence, the World has recognized the Indian Economy as a 'bright star' with its Economic Growth estimated at 7 per cent, which is the highest among all major economies.

Additional Information

• Goods and Services Tax (GST) is a value-added tax system that is implemented in many countries around the world.
• It is a comprehensive indirect tax levied on the supply of goods and services at each stage of the supply chain.
• GST aims to streamline the taxation process, reduce tax evasion, and create a unified tax structure.

The current answer is tax revenue.

Key Points

• Through fiscal policy, the government of a country controls tax revenue and public expenditure. 
• Fiscal Policy plays a remarkable role in the functioning of the economy of any country.
• If the government receives more revenue than it spends it becomes in surplus, while if it spends more on tax then it runs a deficit.
• In India, it is a guiding force that helps the government to decide how much it should spend to support the economy and how much it should earn from the economy to make it run smoothly.​

Additional Information

• In India fiscal policy is formed by Finance Ministry.
• Nirmala Sitaraman is the current Finance Minister of India.
• The fiscal policy was first introduced in India in 2003 under the Fiscal Responsibility and Budget Management Act.