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Indian EconomyMedium

Fiscal deficit of the Government of India is best defined as:

  1. A.Revenue expenditure minus revenue receipts
  2. B.Total expenditure minus total receipts other than borrowings
  3. C.Total expenditure minus interest payments
  4. D.Capital expenditure minus capital receipts

Correct answer

B. Total expenditure minus total receipts other than borrowings

Explanation

The correct answer is B, total expenditure minus total receipts other than borrowings. Fiscal deficit measures the whole amount the government must borrow in a year, because it compares everything it spends with everything it earns from taxes, non-tax revenue, recovery of loans and disinvestment, leaving borrowing out of the receipts side. Option A is wrong because that formula gives the revenue deficit, which shows borrowing for routine running rather than the total borrowing requirement. Option C is wrong because subtracting interest payments from the fiscal deficit, not from total expenditure, gives the primary deficit. Option D is wrong because there is no standard deficit defined in that way; capital receipts themselves include borrowings, so such a figure would double count the very item that fiscal deficit is meant to isolate.

Read the full article: Public Finance and Finance Commission: Articles and Deficits

Practice Questions

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Q1.Indian EconomyEasy

Which article of the Constitution of India provides for the constitution of a Finance Commission?

  1. A.Article 112
  2. B.Article 266
  3. C.Article 280
  4. D.Article 324
Show answer
Correct answer: C. Article 280

Article 280 requires the President to constitute a Finance Commission at the expiration of every fifth year, or earlier if the President considers it necessary, consisting of a Chairman and four other members, and lists the matters on which it is to make recommendations.

Q2.Indian EconomyAsked in: SSC CGL · 20 Jul 2023, Shift 4Hard

Which of the following statements is/are correct regarding the Finance Commission of India? A. The Finance Commission consists of a Chairman and four other members. B. The recommendations made by the Finance Commission are binding on the government and the government needs to grant funds according to the advice of the Commission. C. Article 280 of the Indian Constitution talks about the recommendations of the Finance Commission.

  1. A.A and B only
  2. B.A, B and C
  3. C.A and C only
  4. D.B and C only
Show answer
Correct answer: C. A and C only

Statement A is correct: Article 280 provides that the Commission shall consist of a Chairman and four other members appointed by the President.

Q4.Indian EconomyAsked in: Uttar Pradesh · 22 Dec, 2018, Shift 1Medium

According to Article 243-I of the Constitution of India, a Finance Commission is constituted to review the financial position of the Panchayats:

  1. A.at the expiration of every sixth year
  2. B.at the expiration of every fifth year
  3. C.at the expiration of every second year
  4. D.at the expiration of every third year
Show answer
Correct answer: B. at the expiration of every fifth year

Article 243-I, inserted by the seventy-third Constitutional Amendment of 1992, requires the Governor of a State to constitute a Finance Commission at the expiration of every fifth year to review the financial position of the Panchayats and to recommend how taxes, duties, tolls and fees should be divided between the…

Q5.Indian EconomyAsked in: Uttar Pradesh · UPPSC Civil Service 2016 Official PaperMedium

The State Finance Commission is a:

  1. A.Legal body
  2. B.Non-statutory body
  3. C.Constitutional body
  4. D.None of the above
Show answer
Correct answer: C. Constitutional body

The State Finance Commission owes its existence directly to the Constitution: Article 243-I, added by the seventy-third Amendment, requires the Governor to constitute it every fifth year for the Panchayats, and Article 243-Y extends the arrangement to the Municipalities.