13.Fiscal Policy (Part 1)

Question 1

What is a budget?

Answer 1

A budget is a document that outlines the income and expenditure pattern of the government.

Question 2

What is budgeting?

Answer 2

Budgeting is the procedure adopted by the government to create a budget.

Question 3

What is the relationship between budget policy and fiscal policy?

Answer 3

Budget policy and fiscal policy are the same thing and can be used interchangeably.

Question 4

How is the budget referred to in the Constitution?

Answer 4

The Constitution refers to the budget as the “Annual Financial Statement”. The term “budget” is a popular name for the Annual Financial Statement mentioned in Article 112 of the Constitution.

Question 5

Who presents the annual financial statement?

Answer 5

The annual financial statement is presented in the Parliament, and it is ensured by the President of India that the government presents it.

Question 6

What are the components of the budget regarding income and expenditure?

Answer 6

The income bill is called the “Financial Bill”, and the expenditure bill is called the “Appropriation Bill”. The Appropriation Bill further provides for grants and charged expenditures.

Question 7

Where is the government’s income stored?

Answer 7

The government’s income is stored in the Consolidated Fund of India (CFI).

Question 8

How can money be withdrawn from the Consolidated Fund of India?

Answer 8

Money can be withdrawn from the Consolidated Fund of India through an Appropriation Bill, which requires the approval of Parliament, or through charged expenditure, which does not need the approval of Parliament.

Question 9

When does the financial year for the government of India begin and end?

Answer 9

The financial year for the government of India begins on 1 April and ends on 31 March of the following year.

Question 10

When does the preparation of the budget start?

Answer 10

The preparation of the budget has started in September 2022.

Question 11

What is fiscal policy?

Answer 11

Fiscal policy is a policy of the government regarding its income and expenditure.

Question 12

What are the three types of fiscal policy?

Answer 12

The three types of fiscal policy are: neutral fiscal policy, expansionary fiscal policy, and contractionary fiscal policy.

Question 13

What is neutral fiscal policy?

Answer 13

Neutral fiscal policy occurs when income equals expenditure.

Question 14

What is expansionary fiscal policy?

Answer 14

Expansionary fiscal policy occurs when expenditure is greater than income. It is common in developing nations.

Question 15

What is contractionary fiscal policy?

Answer 15

Contractionary fiscal policy occurs when income is greater than expenditure. It is common in developed countries.

Question 16

What is zero-based budgeting?

Answer 16

Zero-based budgeting refers to planning and preparing the budget from scratch or ‘Zero Base’. It involves reviewing and justifying each ministry’s expenditure to receive funding based on merit.

Question 17

What is the purpose of zero-based budgeting?

Answer 17

The purpose of zero-based budgeting is to eliminate unnecessary expenditure and allocate higher funds to justified and necessary items.

Question 18

What is outcome budgeting?

Answer 18

Outcome budgeting measures the outcomes of government programs and ensures that money is spent for the intended purpose. It holds ministries accountable for achieving predetermined targets and outcomes.

Question 19

What does outcome budgeting focus on?

Answer 19

Outcome budgeting focuses not only on the completion of projects but also on the overall impact and improvement in the relevant areas.

Question 20

When was outcome budgeting first implemented in India?

Answer 20

Outcome budgeting was first implemented by the Government of India in 2006-07 for selected plan schemes.

Question 21

What is gender budgeting?

Answer 21

Gender budgeting is a tool for achieving gender mainstreaming and ensuring that the benefits of development reach both women and men. It involves considering gender perspectives in policy formulation, implementation, and review.

Question 22

What is the purpose of gender budgeting?

Answer 22

The purpose of gender budgeting is to analyze the gender differential impacts of government budgets and translate gender commitments into budgetary commitments.

Question 23

How many financial years are covered in the budget?

Answer 23

The budget provides numbers for three different financial years.

Question 24

What are the three types of numbers provided in the budget?

Answer 24

The three types of numbers provided in the budget are upcoming year numbers, current year numbers, and previous year numbers.

Question 25

In what form are the upcoming year numbers presented?

Answer 25

The upcoming year numbers are presented in the form of Budget Estimates.

Question 26

How are the current year numbers presented in the budget?

Answer 26

The current year numbers are presented in the form of Budget Estimates and Revised Estimates.

Question 27

How are the previous year numbers presented in the budget?

Answer 27

The previous year numbers are presented as Actual numbers.

Question 28

What does the Revenue Account of the budget consist of?

Answer 28

The Revenue Account consists of regular income and expenditure of the government.

Question 29

How are Revenue Receipts categorized in the budget?

Answer 29

Revenue Receipts are categorized into tax and non-tax revenue.

Question 30

What are examples of tax revenues in the budget?

Answer 30

Examples of tax revenues include Income tax, Corporate tax, GST, Excise, Customs, Service, and other government levies.

Question 31

What does non-tax revenue include in the budget?

Answer 31

Non-tax revenue includes fees, fines, interest on loans, dividends on investments, and grants received.

Question 32

What are the two parts of Revenue Expenditure?

Answer 32

The two parts of Revenue Expenditure are Development Expenditure and Non-development expenditure.

Question 33

What is included in Development Expenditure?

Answer 33

Development Expenditure includes the creation and maintenance of government assets like roads, bridges, etc.

Question 34

What is included in Non-development expenditure?

Answer 34

Non-development expenditure includes expenses that do not create any government assets, such as salary, wages, pensions, law and order, civil administration, grants to state governments, subsidies, interest payment, and defense.

Question 35

What does the Capital Account of the budget consist of?

Answer 35

The Capital Account consists of ‘once in a while’ income or expenditure of the government.

Question 36

What are examples of Capital Receipts in the budget?

Answer 36

Examples of Capital Receipts include loans and borrowing, sale of government companies (disinvestment), sale of government assets (land, building, etc.), and recovery of loans.

Question 37

What does Capital Expenditure in the budget include?

Answer 37

Capital Expenditure includes the creation of infrastructure, loans to state governments, and repayment of loans.