UPSC Prelims Practice Questions — The Budget and the imperative of fiscal consolidation
Q1. In India, the statutory framework mandating reduction of fiscal deficit and laying down the obligation of the Union government to present medium-term fiscal policy statements was first established under which one of the following?
- A. The Public Debt Act, 1944
- B. The Fiscal Responsibility and Budget Management Act, 2003
- C. The Government Securities Act, 2006
- D. The Reserve Bank of India Act, 1934
Q2. In the context of the Union Budget, the term 'Effective Capital Expenditure' is best defined as which one of the following?
- A. Capital expenditure of the Centre net of disinvestment receipts
- B. Capital expenditure of the Centre plus Grants-in-Aid to States/UTs for creation of capital assets
- C. Total capital outlay of the Centre and the States after netting out inter-governmental transfers
- D. Capital expenditure of the Centre plus interest payments on capital-account borrowings
Q3. With reference to the Union Budget 2026-27 as compared with the Revised Estimates of 2025-26, consider the following statements:
1. The fiscal deficit, as a percentage of GDP, is budgeted lower in BE 2026-27 than in RE 2025-26.
2. The Centre's debt-to-GDP ratio is budgeted lower in BE 2026-27 than in RE 2025-26.
3. Effective capital expenditure, as a percentage of GDP, is budgeted higher in BE 2026-27 than in BE 2025-26.
Which of the statements given above is/are correct?
- The fiscal deficit, as a percentage of GDP, is budgeted lower in BE 2026-27 than in RE 2025-26.
- The Centre's debt-to-GDP ratio is budgeted lower in BE 2026-27 than in RE 2025-26.
- Effective capital expenditure, as a percentage of GDP, is budgeted higher in BE 2026-27 than in BE 2025-26.
- A. 1 and 2 only
- B. 2 and 3 only
- C. 1 and 3 only
- D. 1, 2 and 3
Q4. With reference to the fiscal consolidation framework articulated in the Union Budget 2026-27, consider the following:
1. Fiscal deficit of 4.3% of GDP in BE 2026-27
2. General government debt-to-GDP ratio of 50 ± 1% to be achieved by 2030-31
3. Elimination of revenue deficit by 2024-25
4. Effective capital expenditure of 4.4% of GDP in BE 2026-27
Which of the above is/are correctly identified as targets/anchors of the Budget 2026-27?
- Fiscal deficit of 4.3% of GDP in BE 2026-27
- General government debt-to-GDP ratio of 50 ± 1% to be achieved by 2030-31
- Elimination of revenue deficit by 2024-25
- Effective capital expenditure of 4.4% of GDP in BE 2026-27
- A. 1, 2 and 4
- B. 2 and 3 only
- C. 1 and 3 only
- D. 1, 2, 3 and 4
Q5. According to the Union Budget 2026-27, the total expenditure of the Union Government is estimated at approximately how many lakh crore rupees?
- A. ₹48.2 lakh crore
- B. ₹50.7 lakh crore
- C. ₹53.5 lakh crore
- D. ₹56.8 lakh crore