Budget & Fiscal Policy Quiz: Indian Economy Practice

Spoilers! These are the Starter quiz’s answers. Easy, Medium, Hard and Mixed rounds show their own answers when you finish.

1. The Union Budget is constitutionally called the 'Annual Financial Statement'. Which Article provides for it?

   • Article 112
   • Article 110
   • Article 266
   • Article 280

   Answer: Article 112. Article 112 requires the President to lay the Annual Financial Statement before Parliament every year. Article 110 defines Money Bills, Article 266 the Consolidated Fund and Article 280 the Finance Commission.

2. Fiscal deficit is equal to:

   • revenue expenditure minus revenue receipts
   • fiscal deficit minus interest payments
   • total expenditure minus (revenue receipts + non-debt capital receipts)
   • total expenditure minus total receipts including borrowings

   Answer: total expenditure minus (revenue receipts + non-debt capital receipts). Fiscal deficit is the gap the government must fill by borrowing. Non-debt capital receipts (loan recoveries, disinvestment) are counted as income, but borrowings are not, since they are what finance the gap.

3. Primary deficit is:

   • fiscal deficit minus grants for creation of capital assets
   • fiscal deficit minus interest payments
   • revenue deficit minus interest payments
   • fiscal deficit minus disinvestment receipts

   Answer: fiscal deficit minus interest payments. Removing interest on past debt shows how much of today's borrowing is due to current policy. Revenue deficit minus grants for capital assets is the effective revenue deficit.

4. Which of the following is a capital receipt of the Union government?

   • Dividends received from public sector undertakings
   • GST collections
   • Interest received on loans given to states
   • Proceeds from disinvestment

   Answer: Proceeds from disinvestment. Capital receipts either create a liability or reduce an asset. Selling government shares reduces assets, so disinvestment is a capital receipt. Dividends and interest are non-tax revenue receipts.

5. The Goods and Services Tax (GST) came into force in India on:

   • 1 April 2017
   • 1 July 2017
   • 8 September 2016
   • 1 January 2018

   Answer: 1 July 2017. GST was rolled out on 1 July 2017. The enabling 101st Constitutional Amendment Act had received assent earlier, on 8 September 2016.

6. In the GST Council, the vote of the Union government carries what weight of the total votes cast?

   • One-half
   • Two-thirds
   • One-third
   • One-fourth

   Answer: One-third. Under Article 279A, the Centre's vote counts for one-third and all states together two-thirds. A decision needs at least three-fourths of the weighted votes, so neither side can push a decision alone.

7. Which of the following is kept outside GST by the Constitution itself?

   • Alcoholic liquor for human consumption
   • Restaurant services
   • Mobile phones
   • Hotel accommodation

   Answer: Alcoholic liquor for human consumption. The 101st Amendment excludes alcoholic liquor for human consumption from GST, so states continue to levy excise and VAT on it. Petroleum products are within GST's scope but will be taxed only from a date the Council recommends.

8. A supply of goods from Maharashtra to Karnataka attracts which GST component?

   • CGST only
   • SGST only
   • CGST + UTGST
   • IGST

   Answer: IGST. Inter-state supplies attract Integrated GST, collected by the Centre (Article 269A) and then apportioned to the consuming state. Intra-state supplies attract CGST + SGST.

9. The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in:

   • 1991
   • 2008
   • 2003
   • 2016

   Answer: 2003. The FRBM Act, 2003 set legal targets to reduce deficits. A review committee under N. K. Singh (report 2017) later proposed public debt as the main anchor, alongside the fiscal deficit.

10. Consider the following statements: 1. Cesses and surcharges levied by the Centre form part of the divisible pool shared with states. 2. The Sixteenth Finance Commission recommended a 41% share for states in the divisible pool for 2026-31. Which is/are correct?

    • 1 only
    • 2 only
    • Both 1 and 2
    • Neither 1 nor 2

    Answer: 2 only. Cesses and surcharges are kept out of the divisible pool (Article 270), so the Centre does not share them. The 16th Finance Commission, chaired by Arvind Panagariya, retained the 41% share set by the 15th.