UPSC Prelims Practice Questions — T.N. can lead in expenditure reform

Q1. Consider the following data: In 2024-25, a State's committed expenditure (salaries, pensions and interest) was almost two-thirds of its revenue receipts, whereas for three comparable large States the corresponding figure was between 45% and 49%. Which of the following inferences can validly be drawn from the above data alone?

  1. Out of each rupee of revenue receipts, the first State had a smaller residual than each of the other three States for spending other than salaries, pensions and interest.
  2. The first State spent more rupees in absolute terms on salaries, pensions and interest than each of the other three States.
  3. The first State's committed expenditure, expressed as a share of its GSDP, was higher than that of each of the other three States.
  • A. 1, 2 and 3
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1 only

Q2. With reference to the classification of State government expenditure in the Reserve Bank of India's State finances data, consider the following statements: Which of the statements given above is/are correct?

  1. A loan given by a State government to one of its public sector undertakings is counted in the State's capital expenditure.
  2. Interest paid on a loan that financed a State highway is not part of capital expenditure, even though the loan itself financed an asset.
  3. A State's capital expenditure for a year can exceed its capital outlay for the same year.
  4. Pensions paid to retired staff of the irrigation department count as developmental expenditure, since irrigation is an economic service.
  • A. 3 and 4 only
  • B. 1, 2 and 3 only
  • C. 1, 2, 3 and 4
  • D. 1 and 2 only

Q3. Suppose a State government finances a sizeable revenue deficit through borrowing year after year. Consider the following statements about the likely consequences: Which of the statements given above is/are correct?

  1. Its interest payments, and therefore its committed expenditure, will tend to rise in later years.
  2. The money borrowed in this way creates no asset whose returns could help service the debt.
  3. Its capital expenditure does not rise merely because the borrowings themselves are capital receipts.
  • A. 1, 2 and 3
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1 only

Q4. With reference to the Finance Commission constituted under Article 280 of the Constitution of India, consider the following statements: Which of the statements given above is/are correct?

  1. It recommends how the net proceeds of taxes are divided between the Union and the States, while allocating the States' share among individual States is left to the Inter-State Council.
  2. It recommends the principles that should govern grants-in-aid of the revenues of the States out of the Consolidated Fund of India.
  3. It makes its recommendations to the President rather than directly to Parliament.
  • A. 1 and 3 only
  • B. 1, 2 and 3
  • C. 2 and 3 only
  • D. 1 and 2 only

Q5. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. In framing its recommendations, the Finance Commission evaluates the finances of the State governments as well as those of the Union.
  2. Under Article 280, the Finance Commission's recommendations on sharing tax proceeds are binding on the Union government.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q6. Consider the following assertion: Tamil Nadu's budget is more rigid than those of Karnataka, Gujarat and Maharashtra. Which of the following statements support/supports the above assertion?

  1. Tamil Nadu's committed expenditure in 2024-25 was almost two-thirds of its revenue receipts, against 45–49% for the other three States.
  2. Tamil Nadu's interest payments in 2025-26 were almost a quarter of its revenue receipts, against 10–16% for the other three States.
  3. Gujarat's capital expenditure, at 2.9% of GSDP, was the highest among the four States.
  • A. 1, 2 and 3
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1 only