taxes types, methods & budgeting process section 4 MCQ Questions & Answers Detailed Explanation

Answer: (d)

Answer: (a)

The central government gives grants to States to implement Centrally Sponsored Schemes (CSCs). And for Central Government (almost) all the expenditure as revenue expenditure

For example, the budgeted amount for the CSC (the core of the core) MGNREGA for the year 2020-21 is Rs. 61,500 crores and is revenue expenditure for Govt. of India. And since it is a GRANT from Govt. of India side to States, so it must be Revenue exp for Govt. of India.

But States can spend this as revenue or capital expenditure in the creation of assets. If States spend this on capital expenditure, then Centres "Effective Revenue Deficit" will get reduced by that amount.

Effective Revenue Deficit = Revenue Deficit - Grants given to States for capital expenditure

Till 2013-14, Funds for CSS were routed through two channels, the consolidated fund of the States and directly to the State/ District Level Autonomous Bodies/Implementing Agencies. (CSSs are a part of funds transfer to States/UTs).

In 2014-15, direct transfers to State implementing agencies were discontinued and all transfers to States including for the CSS are now routed through the Consolidated Funds of the States.

Answer: (d)

When government incurs a fiscal deficit, then it spends more on the economy resulting in an increase in total/aggregate demand. But if total supply also increases, then inflation may not increase. So, the government’s fiscal deficit will necessarily increase aggregate demand but may not increase effective demand. So, (i) the statement is true.

When the economic capacity is fully (100%) utilized and the government spends more than demand increases in the economy but supply may not immediately increase and the companies will have to set up new capacity which may increase cost, resulting in inflation.

But if the economic capacity is underutilized, because of less demand and then the government spends more then the increase in aggregate demand will be met by increased supply, and there may not be inflation.

So, fiscal deficit may or may not cause inflation.

Answer: (c)

The “Outcome Budget” reflects the endeavour of the Government to convert "Outlays" into "Outcomes" by planning expenditure, fixing appropriate targets and quantifying deliverables of each scheme.

The “Outcome Budget” is an effort of the Government to be transparent and accountable to the people. The outcome budget is presented in the parliament.

Answer: (b)

If you have purchased shares/equity of a company then it is the liability of the company towards you.

India’s external liabilities include all the investments made in India either in the form of debt or equity. So, it will include everything FDI, FPI (debt and equity both), External Commercial Borrowing, Govt. of India borrowings from abroad, NRI deposits in India.

Total external liabilities are around 41% of GDP, in which both debt and equity are around equally distributed.

Answer: (d)

Integrated GST (IGST) is levied by the Centre on inter-state supply of goods and services and on imports and exports (on exports effectively there is no tax) of goods and services.

The IGST rate is equal to CGST and the SGST/UTGST rate. The tax revenue is shared equally among the Centre and the consuming State/UT.