taxes types, methods & budgeting process section 1 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Customs duties-Export duty and import duty are levied by Central Government.

Answer: (d)

Deficit financing is the budgetary situation where expenditure is higher than the receipts.

The expenditure revenue gap is financed by either printing of currency or through borrowing. Nowadays most governments both in the developed and developing world are having deficit budgets and these deficits are often financed through borrowing.

Hence the fiscal deficit is the ideal indicator of deficit financing. Deficit financing is very useful in developing countries like India because of revenue scarcity and development expenditure needs.

Since government spends more than receipts, it leads to an increase in demand and may result in inflation also.

Answer: (c)

Public Debt of Govt. of India is Central Government's internal and external debt.

Treasury Bill is Govt. of India's debt because these are bonds issued by GoI.

ECB and FDI relates to companies and PSUs. And NRI deposits are in banks and it is not a debt of Govt. of India.

So, only (i) statement is correct.

Answer: (d)

Answer: (d)

When the Centre does not have the budgetary resources to fund its various schemes/programmes then it asks its agencies to borrow and fund these programmes. For example, for the public distribution scheme, FCI borrows from National Small Savings Fund (NSSF).

Similarly, HUDCO and NHB borrow to fund the affordable scheme of the government, NABARD borrows for irrigation and rural housing. Rural Electrification Corporation (REC) borrows for rural electrification. Ideally, the Centre should borrow for these schemes but it asks its various agencies to take the loan in their name which is then not shown in the Centre’s budget.

These Off-Budget Borrowings (also called extra-budgetary resources) allows the Centre to reduce the immediate impact on the fiscal, as the repayments made by the government are calibrated over many years.

These however add to the overall public debt of Govt. of India. CAG has expressed concern over it and if these off-budget borrowings would have been included in the budget then the Centre’s fiscal deficit would have been more than 5% rather than 3.8% in 2019-20.

Answer: (c)