19.Expenditure and FRBM Act

Question 1

What does fiscal drag refer to?

Answer 1

Fiscal drag refers to the adverse effect of progressive taxation on demands and economic expansions.

Question 2

When does fiscal drag occur?

Answer 2

Fiscal drag occurs when an increase in national income brings more individuals under the tax net, and progressive taxation requires them to pay higher taxes as their income rises.

Question 3

How does fiscal drag affect purchasing power?

Answer 3

Despite nominal income growth, real income may not correspondingly increase, leading to a decline in purchasing power of individuals.

Question 4

What is the impact of high taxation on aggregate demand?

Answer 4

High taxation can result in a reduction in aggregate demand, which can cause a slowdown in the economy due to low demand.

Question 5

What was the role of the Planning Commission?

Answer 5

The Planning Commission was responsible for formulating five-year plans in India.

Question 6

How many five-year plans did the Planning Commission prepare?

Answer 6

The Planning Commission prepared twelve five-year plans. The last plan covered the period 2012-2017.

Question 7

What replaced the Planning Commission?

Answer 7

The Government of India replaced the Planning Commission with NITI (National Institution for Transformation of India) Aayog in 2015.

Question 8

What is the responsibility of NITI Aayog?

Answer 8

NITI Aayog is responsible for making long-term planning for the country and prepares a vision document for a duration of 15 years.

Question 9

What is the name of the document prepared by NITI Aayog?

Answer 9

NITI Aayog prepared a document named “India @ 75” outlining the vision for India’s development.

Question 10

How did the Government of India categorize their expenditure until 2016-17?

Answer 10

The Government of India categorized their expenditure into Planned Expenditure and Non-Planned Expenditure.

Question 11

What were Planned Expenditures?

Answer 11

Planned Expenditures were expenditures for which provisions were made in five-year plans. These expenditures were primarily investments planned for a five-year period and considered productive expenditures.

Question 12

What were Non-Planned Expenditures?

Answer 12

Non-Planned Expenditures were expenditures for which provisions were not made in the five-year plan period. These expenditures were uncertain, volatile, and contingent, making them difficult to predict for a five-year plan.

Question 13

How were Non-Planned expenditures categorized?

Answer 13

Non-Planned expenditures were categorized into three types:
a. Expenditures that cannot be completed in five years.
b. Expenditures not mentioned in the five-year plan documents.
c. All expenditures of the revenue account, including both developmental and non-developmental expenses.

Question 14

When was the division of expenditures into Planned and Non-Planned categories stopped?

Answer 14

The division of expenditures into Planned and Non-Planned categories was stopped in 2017.

Question 15

How are expenditures classified post-2017?

Answer 15

Post-2017, expenditures are classified into Revenue expenditure and Capital expenditure.

Question 16

What has been the trend in capital expenditure spending by the Government of India post-2016-17?

Answer 16

The Government of India has been spending less on capital expenditure, focusing more on the maintenance of assets rather than creating new assets.

Question 17

In which areas has the Government of India increased its spending post-2016-17?

Answer 17

The Government of India has increased its spending on healthcare, education, and social welfare programs for the poor.

Question 18

What was the role of the Bimal Jalan Committee?

Answer 18

The Bimal Jalan Committee was appointed to manage the expenditures of the Government of India.

Question 19

What was the objective of enacting the FRBM Act, 2003?

Answer 19

The objective of enacting the FRBM Act, 2003 was to pursue a prudent fiscal policy framework through revenue-led fiscal consolidation.

Question 20

What are the major objectives of the FRBM Act?

Answer 20

The major objectives of the FRBM Act are to reduce the fiscal deficit, imbibe fiscal discipline, and ensure long-run macroeconomic stability.

Question 21

Who chaired the Fiscal Responsibility and Budget Management (FRBM) review committee?

Answer 21

The Fiscal Responsibility and Budget Management (FRBM) review committee, also known as the NK Singh Committee, was chaired by NK Singh, former Revenue and Expenditure Secretary.

Question 22

What is the purpose of off-budget borrowings?

Answer 22

Off-budget borrowings allow the government to pay for its expenses while keeping the debt off the books and out of the calculation for fiscal deficit.

Question 23

What does ‘Public debt’ refer to in the case of India?

Answer 23

In the case of India, ‘Public debt’ refers to the borrowings of the Central Government.

Question 24

What is the term used to describe the combined debt of the Central and State Governments?

Answer 24

The combined debt of the Central and State Governments is known as General Government debt.

Question 25

How can the Government’s public debt be categorized in terms of its sources?

Answer 25

The Government’s public debt can be categorized into internal debt (borrowed within the country) and external debt (borrowed from non-Indian sources).

Question 26

Which source of borrowing does the Government of India prefer?

Answer 26

The Government of India prefers to borrow more from internal sources than from external sources.

Question 27

What are the implications of external borrowing for the Government?

Answer 27

In the case of external borrowing, the Government needs to repay its borrowing in the currency of the respective country. If the rupee becomes weaker, the Government needs to repay more.

Question 28

What is the majority of government borrowings used for?

Answer 28

The majority of government borrowings are used for day-to-day expenditure.

Question 29

What does the Debt-to-GDP Ratio measure?

Answer 29

The Debt-to-GDP Ratio is the ratio between a country’s government debt (measured in units of currency) and its Gross Domestic Product (GDP).

Question 30

What does Article 293 of the Indian constitution state regarding state borrowing?

Answer 30

As per Article 293 of the Indian constitution, a State may not raise any loan without the consent of the Government of India if there is still an outstanding loan which has been made to the State by the Government of India or by its predecessor Government, or in respect of which a guarantee has been given by the Government of India or by its predecessor Government.