Which one among the following items comprises the major portion of revenue expenditure of the Union Government of India?
- A.Salaries
- B.Interest Payments
- C.Road Transport and Highways
- D.Defence Services
Correct answer
Explanation
The correct answer is B, Interest Payments. Interest on the public debt is the single largest item of the Union Government's revenue expenditure, taking roughly a third of it.
Revenue expenditure is spending that creates no assets and does not reduce liabilities: interest, salaries, pensions, subsidies, grants to states and the running costs of ministries. Capital expenditure, by contrast, builds assets such as roads and railways or repays loans. Because the Union borrows heavily every year to cover its fiscal deficit, the interest it owes on past borrowing has grown into the biggest revenue item in the budget, ahead of subsidies, defence and pensions. Interest payments also take a large share of the Centre's revenue receipts, which is why reducing debt is a stated aim of fiscal policy.
Option A is wrong because salaries are spread across ministries and together are much smaller than interest. Option C is wrong because road transport and highways spending is mostly capital expenditure. Option D is wrong because defence services, though large, are below interest payments on the revenue side.
Exam tip: biggest revenue expenditure of the Centre = interest payments; roads and highways = mainly capital expenditure.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
Show answer
Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
Read the full explanation →