A subsidy given by the government is an example of which kind of expenditure?
- A.Capital expenditure
- B.Revenue expenditure
- C.Plan investment
- D.Debt repayment
Correct answer
Explanation
The correct answer is B, revenue expenditure. A subsidy neither creates an asset for the government nor reduces any liability, so in the budget it is classified as revenue expenditure, and a large subsidy bill therefore widens the revenue deficit as well as the fiscal deficit. Option A is wrong because capital expenditure is spending that creates an asset, such as a road, a building or a machine, or that reduces a liability by repaying a loan. Option C is wrong because the plan and non-plan division of expenditure was given up some years ago and was in any case about the purpose of spending, not its revenue or capital character. Option D is wrong because repayment of the principal of a debt is capital expenditure, although the interest paid on it is revenue expenditure.
Read the full article: Subsidies and Direct Benefit Transfer in India: Notes
Practice Questions
View allThe Direct Benefit Transfer scheme of the Government of India was launched on which date?
- A.1 January 2013
- B.15 August 2014
- C.1 April 2015
- D.26 January 2016
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Direct Benefit Transfer began on that date in a small group of districts and for a limited number of schemes, and was then extended across the country and to hundreds of central schemes, paying scholarships, pensions, wages and subsidies into the beneficiary's own bank account.
Read the full explanation →In the context of Direct Benefit Transfer, the JAM trinity stands for:
- A.Jan Dhan, Aadhaar and Mobile
- B.Jan Dhan, Agriculture and Market
- C.Jobs, Aadhaar and Money
- D.Jan Dhan, Ayushman and MGNREGA
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The Economic Survey of 2014-15 used the expression JAM number trinity for these three, because together they make it possible to send money to a poor household without a middleman: the Jan Dhan account receives the payment, the Aadhaar number identifies the beneficiary and removes duplicate names, and the mobile…
Read the full explanation →The PAHAL scheme of the Government of India is related to the direct transfer of the subsidy on:
- A.Fertilisers
- B.Domestic LPG
- C.Food grains
- D.Kerosene for industry
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PAHAL, the direct benefit transfer scheme for cooking gas, was begun in fifty-four districts in November 2014 and extended to the whole country from 1 January 2015; the consumer buys the cylinder at the market price and the subsidy is credited to his bank account, and the Give It Up…
Read the full explanation →In the Union Budget of India, which of the following is NOT counted among the major subsidies?
- A.Food subsidy
- B.Fertiliser subsidy
- C.Petroleum subsidy
- D.Education subsidy
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The budget documents group food, fertiliser and petroleum together as the major subsidies, because they are the three largest explicit subsidy payments made by the central government.
Read the full explanation →Under the National Food Security Act, 2013, a priority household is entitled to how much food grain?
- A.Five kilograms per person per month
- B.Thirty-five kilograms per person per month
- C.Five kilograms per household per month
- D.Ten kilograms per household per month
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The Act divides the covered population into priority households, who receive five kilograms of grain for each member every month, and Antyodaya Anna Yojana households, which are the poorest and receive thirty-five kilograms for the whole household every month.
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