Public Finance And Fiscal Policy

Question 3

What is a ‘Benami transaction’ according to the Prohibition of Benami Property Transactions Act (PBPT Act), 1988?

Answer 3

A transaction for a property made in a fictitious name [source: 2863], or where the actual owner is unaware of or denies ownership [source: 2864].

Question 4

Can the real owner recover property held benami from the benamidar under the PBPT Act? What can happen to such properties?

Answer 4

No, the Act prohibits recovery by the real owner [source: 2865]. Properties held benami are liable for confiscation by the Government without compensation [source: 2866].

Question 5

What appellate mechanism exists under the PBPT Act?

Answer 5

An Adjudicating Authority and an Appellate Tribunal [source: 2867]. The Adjudicating Authority and Appellate Tribunal referred to in the Prevention of Money Laundering Act (PMLA), 2002 have been notified for the PBPT Act as well [source: 2868].

Question 6

What is the National Pension Scheme (NPS)? Who regulates it?

Answer 6

A social security initiative by the Central Government open to public, private, and unorganised sector employees [source: 2869]. Subscribers invest regularly during employment and can withdraw a percentage upon retirement [source: 2870, 2871]. Regulated by the Pension Fund Regulatory and Development Authority (PFRDA) [source: 2872].

Question 7

Who is mandatorily covered under NPS?

Answer 7

Central Government employees joining on or after Jan 1, 2004 (except armed forces) [source: 2875, 2876]. State Government employees joining after the date of notification by respective State Governments [source: 2873, 2874].

Question 8

What is the latest tax deduction rule for employer’s contribution to NPS (effective Apr 2025)?

Answer 8

The employer’s contribution eligible for deduction under Section 80CCD(2) (beyond the 80CCE limit) is increased to 14% of salary (basic + DA) for all employees (previously 14% only for Central Govt employees and 10% for others) [source: What is National Pension Scheme: Tax Benefits, Eligibility, Returns and Interest Rate].

Question 9

According to the text, will GST drastically reduce India’s Current Account Deficit (CAD) or boost Forex reserves significantly?

Answer 9

No, the text suggests it won’t drastically reduce CAD, mainly because India is a net importer of fuel/gas [source: 2879, 2880]. While exports might become more competitive, a drastic increase in forex reserves isn’t expected [source: 2881].

Question 10

According to the text, will GST implementation enable India to overtake China’s economy in the near future?

Answer 10

No, the text suggests it will not enormously increase growth to enable overtaking China in the near future, although it aims to boost ‘Make in India’ and make domestic products competitive [source: 2882, 2884].

Question 11

Which measures can help reduce the fiscal deficit according to the text?

Answer 11

Reducing revenue expenditure [source: 2886]. Rationalizing subsidies [source: 2889].

Question 12

Which measures mentioned would likely increase the fiscal deficit?

Answer 12

Introducing a new welfare scheme [source: 2888]. Reducing import duties (reduces tax revenue) [source: 2890]. Expanding industries (if government-funded) [source: 2916].

Question 13

What constitutes the Capital Budget of the Government of India?

Answer 13

Includes capital expenditure (e.g., acquisition of assets like roads, buildings, machinery; investments; loans/advances granted to States/UTs) [source: 2891, 2893] and capital receipts (e.g., loans received from foreign governments) [source: 2892].

Question 14

What is the Financial Stability and Development Council (FSDC)? Who heads it?

Answer 14

An apex-level forum set up by the Government in Dec 2010 [source: 2894]. Headed by the Union Finance Minister [source: 2895]. It is not an organ of NITI Aayog [source: 2894].

Question 15

What are the functions of the FSDC mentioned?

Answer 15

Monitors macroprudential supervision of the economy [source: 2896]. Focuses on financial literacy and financial inclusion [source: 2896]. Discusses implementation strategy for its decisions and Union Budget announcements [source: Financial Stability and Development Council - PMF IAS]. Recent discussions included standardising KYC and countering illegal lending apps [source: Financial Stability and Development Council - PMF IAS].

Question 16

What are the stated objectives of the Sovereign Gold Bond (SGB) Scheme and Gold Monetization Scheme?

Answer 16

To reduce the demand for physical gold, including through imports, and thus reduce India’s dependence on gold imports [source: 2905]. The Gold Monetization Scheme specifically aims to bring idle gold held by households/institutions into the market [source: 2903]. Promoting FDI in the gold/jewellery sector is not the purpose [source: 2904].

Question 17

What was the status of the Gold Monetization Scheme as of April 2025? How much gold was mobilized by Nov 2024?

Answer 17

The government reportedly discontinued the Gold Monetisation Scheme in early April 2025 [source: Gold prices up: After Sovereign Gold Bonds, govt discontinues Gold Monetisation Scheme; check details - Business Today]. As of Nov 2024, about 31,164 kg of gold had been mobilized under the scheme [source: Gold prices up: After Sovereign Gold Bonds, govt discontinues Gold Monetisation Scheme; check details - Business Today].

Question 18

Which Ministry/Department formulates the Union Budget?

Answer 18

The Department of Economic Affairs under the Ministry of Finance [source: 2906].

Question 19

What is the Consolidated Fund of India? Can funds be withdrawn without Parliamentary authorization?

Answer 19

Consists of revenues received by the government (taxes, borrowings, loans) [source: 2907]. All government expenditure is incurred from this fund [source: 2908]. No amount can be withdrawn without authorization from Parliament [source: 2908].

Question 20

What is the Public Account of India? Is Parliamentary authorization needed for payments from it?

Answer 20

Constituted under Article 266(2) [source: 2909]. Holds transactions relating to debt not included in the Consolidated Fund [source: 2909]; includes funds held in trust by the government (e.g., Small Savings, Provident Funds, Deposits, Remittances) [source: 2910, Public Account – A Continuing Aberration in Our Financial System - Yojana]. Parliamentary authorization for payments is not required [source: 2911].

Question 21

What is Revenue Expenditure?

Answer 21

Expenditure which neither creates assets nor reduces liability [source: 2912]. It’s short-period expenditure for the normal functioning of government departments and services, interest payments, subsidies, etc. [source: 2913, 2915]. Reducing it can help control the deficit [source: 2913].

Question 22

What happened to the Plan vs Non-Plan Expenditure classification in the Union Budget?

Answer 22

This classification was removed post the dismantling of the Planning Commission and discontinuation of Five Year Plans [source: 2926, 2927, 2928]. It was linked to expenditures done under Five Year Plans [source: 2925].

Question 23

What is the nature of GST regarding tax collection and destination?

Answer 23

GST is based on the principle of destination-based consumption taxation [source: 2932]. It’s a dual GST with Centre (CGST) and States (SGST) levying tax simultaneously [source: 2932, 2933]. Integrated GST (IGST) is levied on inter-state supplies [source: 2934].

Question 24

How are imports treated under GST?

Answer 24

Imports are treated as inter-state supplies and are subject to IGST in addition to applicable customs duties [source: 2937].

Question 25

What was a key decision from the 55th GST Council meeting in Dec 2024?

Answer 25

Various recommendations were made regarding law changes, rules, clarifications, rates, exemptions, ITC, etc. Approval was given for IGST settlement recommendations, while procedural rules for GSTAT were noted for further examination [source: GST COUNCIL DECISIONS AND RECENT DEVELOPMENTS IN GST - Tax Management India. Com].

Question 26

| Question | Answer |

Question 27

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Question 28

| What is a Collateralized Borrowing and Lending Obligation (CBLO)? | A money market instrument representing a loan obligation between borrower and lender. Launched by CCIL in 2003

Answer 28

it allows entities (especially non-banks restricted from call money market) to get short-term loans by providing prescribed securities (like G-Secs) as collateral. Similar to call money but requires collateral. |

Question 29

| What are Financial Instruments? Give examples. | Real or virtual documents representing a legal agreement involving monetary value. Can be debt-based or equity-based. Examples include currency

Answer 29

deposits

Question 30

| Which entities are permitted to undertake repo transactions in corporate debt securities in India? | Scheduled commercial banks (excl. RRBs/LABs)

Answer 30

Primary Dealers

Question 31

| Who are the major participants in the Government Securities (G-Secs) market in India? | Commercial banks

Answer 31

Primary Dealers (PDs act as market makers)

Question 32

| What are Inflation-Indexed Bonds (IIBs)? What is their primary purpose? | Financial instruments linking interest and principal payments to a price index (like WPI in the text's example) to protect the bonds' purchasing power against inflation. |

Question 33

| Can the government reduce coupon rates on borrowing using IIBs according to the text? | Yes

Answer 33

the text suggests the government can potentially reduce coupon rates because it can influence inflation (the underlying variable) through its policies. |

Question 34

| Are IIBs still actively issued in India? | No

Answer 34

according to search results

Question 35

| What are 'Indirect Transfers' in the context of taxation? | Situations where shares of a foreign entity owning assets in India are transferred

Answer 35

instead of directly transferring the Indian assets. Tax implications arose from the 2012 Income Tax amendment (linked to Vodafone case) which deemed shares of foreign companies deriving substantial value from Indian assets as situated in India. |

Question 36

| What happened to the 'retrospective taxation' aspect of indirect transfers? | The 2012 amendment applied retrospectively. However

Answer 36

this retrospective application was nullified by the Taxation Laws (Amendment) Bill

Question 37

| Define Capital Expenditure (CapEx) and Revenue Expenditure. Give examples. | CapEx: Expenses to acquire

Answer 37

upgrade

Question 38

| Are Debt Financing and Equity Financing considered Capital Receipts or Capital Expenditure? | Capital Receipts

Answer 38

as they create liabilities or reduce financial assets for the company. Funds raised are typically used for CapEx. |

Question 39

| What does Household Financial Savings comprise? Does it contribute to government borrowing? | Includes currency

Answer 39

bank deposits

Question 40

| What was the trend in India's Net Household Financial Savings in FY24 and early FY25? | It improved slightly to 5.3% of GDP in FY24 (from a low of 5% in FY23) [source: Indian households saving more or just drowning in debt? - The Economic Times]. Early indicators showed a sharper rebound to 7.3% of GDP in H1 FY25 [source: Indian households saving more or just drowning in debt? - The Economic Times]. |

Question 41

| What are the main components of Internal Public Debt mentioned? | Marketable debt (Government dated securities

Answer 41

Treasury Bills issued via auctions) and Non-marketable debt. Dated securities formed the largest part (68.1%) of total public debt at end-March 2021. |

Question 42

| What are Foreign Currency Convertible Bonds (FCCBs)? Are they considered FDI? | Bonds issued by Indian companies in foreign currency

Answer 42

with principal/interest payable in foreign currency. They are hybrid debt/equity instruments offering an option to convert into equity at maturity. Yes

Question 43

| How do FII investment limits typically differ from FDI thresholds? | FII/FPI investment limit per entity is usually below 10% of a company's issued capital

Answer 43

while FDI often implies a controlling stake (typically 10% or more). Not every FII investment qualifies as FDI. |

Question 44

| What are Depository Receipts (ADRs/GDRs)? Are they considered FDI? | Negotiable securities issued outside India by a depository bank representing underlying Indian equity shares held by a custodian bank in India. ADRs trade in the US

Answer 44

GDRs elsewhere. Yes

Question 45

| Do deposits in NRE/NRO accounts constitute FDI? | No. NRE/NRO accounts are used by NRIs to deposit foreign earnings for transactions/investments in India. These deposits themselves do not come under FDI. |

Question 46

| What causes Demand-Pull Inflation? Give examples of contributing factors. | An increase in aggregate demand when supply remains the same or decreases

Answer 46

pulling prices higher. Causes include: Expansionary monetary/fiscal policy (e.g.

Question 47

| Which factors mentioned do not directly cause demand-pull inflation? | Formal wage indexation (wages automatically linked to prices). Higher interest rates (which reduce spending and demand). |

Question 48

| What three statements must the government place before Parliament annually under the FRBM Act? | 1. Macroeconomic Framework Statement (MFS) 2. Fiscal Policy Strategy Statement (FPSS) 3. Medium-Term Fiscal Policy Statement (MTFPS). |

Question 49

| How is the Economic Cost of food grains calculated for FCI? | Economic Cost = Acquisition Cost + Distribution Cost. Acquisition Cost = MSP (+ bonus if any) + Procurement Incidentals (state taxes

Answer 49

commissions

Question 50

| What was FCI's estimated economic cost for rice and wheat for 2024-25? | Estimated at ₹39.75/kg for rice and ₹27.74/kg for wheat [source: FCI may take Rs 40000 crore loans - Economy News - The Financial Express]. |

Question 51

| What is the Equalisation Levy? On which act is it based? | A tax introduced in India (Finance Act

Answer 51

2016) intended to tax digital transactions/income accruing to foreign e-commerce companies from India

Question 52

| Can non-resident entities claim tax credit under Double Taxation Avoidance Agreements (DTAAs) for the Equalisation Levy paid? | No

Answer 52

because the levy is not part of the Income Tax Act. |

Question 53

| What is the latest status of the 2% Equalisation Levy in India? | The Union Budget 2024 announced that the 2% EL will not apply to online transactions from August 1

Answer 53

2024

Question 54

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Answer 54

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Question 55

How are imports treated under GST?

Answer 55

Imports of goods or services are treated as inter-state supplies and are subject to Integrated GST (IGST) in addition to applicable customs duties.

Question 56

What is a Fiscal Stimulus? What is its objective?

Answer 56

An incentive package (tax rebates, increased government spending) used by policymakers to boost spending and reduce the severity of recessions or reinvigorate a floundering economy. The objective is to boost employment and spending.

Question 57

How do tax cuts and increased government spending work as fiscal stimulus measures?

Answer 57

Tax cuts increase disposable income, leading to more spending, which boosts demand, production, and economic growth. Increased government spending injects money into the economy, decreasing unemployment, increasing spending, and countering recession impacts. Governments do not abolish subsidies as part of stimulus; they might provide them.

Question 58

What was the Forward Markets Commission (FMC)? What is its current status?

Answer 58

It was a regulatory body monitoring futures and commodities markets in India, controlled by SEBI under the Ministry of Finance. FMC was merged with SEBI effective September 28, 2015.

Question 59

What has been the impact of the FMC-SEBI merger according to a study cited in the search results?

Answer 59

The merger reportedly improved regulatory oversight, increased investor confidence and participation, and resulted in greater market efficiency and transparency [cite: A STUDY ON“FMC MERGER WITH SEBI” - Journal of Emerging Technologies and Innovative Research].

Question 60

What is a 'Bear' investor? What is a 'Bull' investor?

Answer 60

A Bear believes a security or market is headed downward and is generally pessimistic. A Bull believes the market or a specific security/industry is poised to rise and buys securities assuming they can sell later at a higher price.

Question 61

What is a Direct Tax? Give examples mentioned in the text.

Answer 61

A tax where the incidence (initial burden) and impact (final burden) fall on the same entity; the burden cannot be shifted. Examples mentioned: Fringe Benefits Tax (FBT - paid by companies on employee benefits), Interest Tax (on interest earned/paid), Securities Transaction Tax (STT - paid by investor on share transaction value).

Question 62

What was the trend in India's net direct tax collections for FY 2024-25 (as of Feb 10, 2025)?

Answer 62

Net direct tax collections (Corporate Tax + Personal Income Tax) rose 14.69% year-on-year to ₹17.78 lakh crore [cite: India's net direct tax collection rises 15% to cross ₹17.78 lakh crore in 2024-25 - DD News]. Gross collections grew 19.06% [cite: India's net direct tax collection rises 15% to cross ₹17.78 lakh crore in 2024-25 - DD News].

Question 63

What change was proposed for Securities Transaction Tax (STT) rates effective Oct 1, 2024?

Answer 63

STT on futures was proposed to increase from 0.0125% to 0.02%, and STT on options from 0.0625% to 0.1% [cite: Securities Transaction Tax (STT)- Features, Tax Rate and Applicability - ClearTax].

Question 64

What is the Sensex composed of?

Answer 64

30 of the largest and most actively traded stocks on the Bombay Stock Exchange (BSE).

Question 65

How is the Sensex calculated?

Answer 65

Using a free-float market capitalization method, where companies are weighted based on the market value of shares readily available for trading.

Question 66

What was the performance trend of Sensex in 2024 and the outlook for 2025?

Answer 66

Sensex provided modest returns of over 8% in 2024, continuing a positive annual return streak since 2016 [cite: Sensex returns in odd years outshine even. What is the stock market outlook for 2025? - Mint]. Analysts expected the long-term growth story to continue in 2025 [cite: Sensex returns in odd years outshine even. What is the stock market outlook for 2025? - Mint].

Question 67

Which stock exchange is considered the oldest? Which is the largest by market capitalization?

Answer 67

Oldest: Amsterdam Stock Exchange (founded 1602). Largest by market cap: New York Stock Exchange (NYSE).

Question 68

Define Fiscal Deficit.

Answer 68

Total expenditure minus total receipts (excluding borrowings). It indicates the total borrowing requirement of the government. Formula: Fiscal Deficit = Total expenditure - Total receipts (excluding borrowings).

Question 69

Define Budget Deficit.

Answer 69

The difference between total expenditure and total receipts. Indicates excess expenditures. Formula: Budget Deficit = Total expenditure - Total receipts. (Note: This measure is less commonly used now compared to Fiscal Deficit).

Question 70

Define Revenue Deficit.

Answer 70

When revenue expenditure exceeds revenue receipts. Indicates the government cannot cover its day-to-day expenses from its day-to-day receipts. Formula: Revenue Deficit = Revenue expenditure - Revenue receipts.

Question 71

Define Primary Deficit.

Answer 71

The difference between the fiscal deficit and interest payments on previous borrowings. Shows borrowing requirement excluding interest payments. Formula: Primary Deficit = Fiscal deficit - Interest payment.

Question 72

What were the targeted Fiscal Deficit and Revenue Deficit figures for India in the 2024-25 budget?

Answer 72

Fiscal Deficit target: 4.9% of GDP (down from 5.6% actual in 2023-24) [cite: Union Budget 2024-25 Analysis - PRS India]. Revenue Deficit target: 1.8% of GDP (down from 2.6% actual in 2023-24) [cite: Union Budget 2024-25 Analysis - PRS India].