UPSC Prelims Practice Questions — Centre’s fiscal outlook faces geopolitical, revenue risks
Q1. With reference to the fiscal indicators announced in the Union Budget 2026-27, consider the following:
1. Fiscal deficit targeted at 4.3% of GDP, against 4.4% of GDP in RE 2025-26
2. Revenue deficit targeted at 1.5% of GDP
3. Outstanding liabilities of the Centre estimated at 55.6% of GDP
4. Nominal GDP growth assumption of 12% for the year
Which of the above is/are NOT correct?
- Fiscal deficit targeted at 4.3% of GDP, against 4.4% of GDP in RE 2025-26
- Revenue deficit targeted at 1.5% of GDP
- Outstanding liabilities of the Centre estimated at 55.6% of GDP
- Nominal GDP growth assumption of 12% for the year
- A. 1 and 3
- B. 2 only
- C. 1, 2 and 4
- D. 4 only
Q2. The 4.3% of GDP figure targeted for 2026-27 measures which one of the following?
- A. The excess of total expenditure over total receipts other than borrowings
- B. The excess of revenue expenditure over revenue receipts of the government
- C. The excess of total expenditure over total receipts, excluding interest payments
- D. The excess of revenue expenditure over revenue receipts, net of grants for capital assets
Q3. In the GST structure recommended by the 56th GST Council, the 'special de-merit rate' refers to which one of the following?
- A. A 40% rate on selected luxury and sin goods, over and above the two principal rates
- B. A 28% rate retained on selected goods together with compensation cess on them
- C. A 40% rate levied on imported luxury goods in lieu of basic customs duty
- D. A 12% rate retained on selected goods pending clearance of compensation cess dues
Q4. With reference to the GST changes given effect to in September 2025, consider the following:
1. Beedis were placed in the 40% de-merit rate along with pan masala
2. GST on man-made fibre was reduced from 18% to 5%
3. Cigarettes and chewing tobacco such as zarda continue at their existing GST and compensation cess rates until liabilities under the compensation cess account are cleared
4. The revised rates and exemptions took effect from 22 September 2025
Which of the above is/are correctly identified?
- Beedis were placed in the 40% de-merit rate along with pan masala
- GST on man-made fibre was reduced from 18% to 5%
- Cigarettes and chewing tobacco such as zarda continue at their existing GST and compensation cess rates until liabilities under the compensation cess account are cleared
- The revised rates and exemptions took effect from 22 September 2025
- A. 1 and 2 only
- B. 2, 3 and 4 only
- C. 1, 3 and 4 only
- D. 1, 2, 3 and 4
Q5. With reference to the Centre's gross tax revenue and its sharing with States, consider the following:
1. Gross tax revenue of the Centre comprises direct taxes such as corporation tax and personal income tax, and indirect taxes such as GST, customs and union excise duties
2. Revenue from cesses and surcharges levied by the Union forms part of the divisible pool shared with the States
3. The Sixteenth Finance Commission has recommended the States' share in the divisible pool at 41%, the same as that recommended by its predecessor
4. Owing to the exclusions from the divisible pool, the States' share in the Centre's gross tax revenue was around 29% in 2020-21
Which of the above is/are NOT correct?
- Gross tax revenue of the Centre comprises direct taxes such as corporation tax and personal income tax, and indirect taxes such as GST, customs and union excise duties
- Revenue from cesses and surcharges levied by the Union forms part of the divisible pool shared with the States
- The Sixteenth Finance Commission has recommended the States' share in the divisible pool at 41%, the same as that recommended by its predecessor
- Owing to the exclusions from the divisible pool, the States' share in the Centre's gross tax revenue was around 29% in 2020-21
- A. 2 only
- B. 1 and 3
- C. 2 and 4
- D. 3 and 4
Q6. With reference to the tax revenue estimates in the Union Budget 2026-27, consider the following:
1. Gross tax revenue estimated at Rs 44.04 lakh crore
2. Gross tax revenue-to-GDP ratio estimated at 8.0 per cent
3. Direct taxes estimated at Rs 26.97 lakh crore, about 61.2 per cent of gross tax revenue
4. Indirect taxes estimated at Rs 17.07 lakh crore
Which of the above is/are correctly identified?
- Gross tax revenue estimated at Rs 44.04 lakh crore
- Gross tax revenue-to-GDP ratio estimated at 8.0 per cent
- Direct taxes estimated at Rs 26.97 lakh crore, about 61.2 per cent of gross tax revenue
- Indirect taxes estimated at Rs 17.07 lakh crore
- A. 1, 2 and 3 only
- B. 1, 3 and 4 only
- C. 2 and 4 only
- D. 1, 2, 3 and 4
Q7. Tax buoyancy is computed as the ratio of the percentage growth in tax revenue to the percentage growth in nominal GDP. The official nominal GDP estimates used in this computation are released by which one of the following?
- A. The National Statistical Office under the Ministry of Statistics and Programme Implementation
- B. The Department of Economic Affairs under the Ministry of Finance
- C. The Central Board of Direct Taxes under the Department of Revenue
- D. The Department of Economic and Policy Research of the Reserve Bank of India
Q8. With reference to tax buoyancy, consider the following:
1. A buoyancy value above one implies that tax revenue is growing faster than GDP
2. Buoyancy is measured after adjusting tax revenue for the effect of discretionary changes in tax rates and tax policy
3. Direct tax buoyancy for India stood at 2.12 in 2023-24
4. In 2023-24, direct tax collections grew by 17.82 per cent while nominal GDP grew by 8.42 per cent
Which of the above is/are NOT correct?
- A buoyancy value above one implies that tax revenue is growing faster than GDP
- Buoyancy is measured after adjusting tax revenue for the effect of discretionary changes in tax rates and tax policy
- Direct tax buoyancy for India stood at 2.12 in 2023-24
- In 2023-24, direct tax collections grew by 17.82 per cent while nominal GDP grew by 8.42 per cent
- A. 1 and 3
- B. 2 and 4
- C. 2 only
- D. 4 only
Q9. The office that releases the monthly accounts of the Union Government showing fiscal deficit, expenditure and revenue collections functions under which one of the following?
- A. The Department of Expenditure in the Ministry of Finance
- B. The Department of Revenue in the Ministry of Finance
- C. The Department of Economic Affairs in the Ministry of Finance
- D. The Comptroller and Auditor General of India, a constitutional authority
Q10. With reference to the Sixteenth Finance Commission, consider the following:
1. It is chaired by Dr. Arvind Panagariya, a former Vice-Chairman of NITI Aayog
2. Its recommendations cover the five-year award period 2026-27 to 2030-31
3. It has recommended discontinuing revenue deficit grants as well as sector-specific and state-specific grants
4. In horizontal devolution among States it has assigned the highest weight, of 42.5 per cent, to population as per the 2011 Census
Which of the above is/are NOT correct?
- It is chaired by Dr. Arvind Panagariya, a former Vice-Chairman of NITI Aayog
- Its recommendations cover the five-year award period 2026-27 to 2030-31
- It has recommended discontinuing revenue deficit grants as well as sector-specific and state-specific grants
- In horizontal devolution among States it has assigned the highest weight, of 42.5 per cent, to population as per the 2011 Census
- A. 1 and 2
- B. 3 only
- C. 4 only
- D. 2 and 4
Q11. How much does the Centre expect to receive in 2026-27 as dividends and surpluses from the Reserve Bank of India, nationalised banks and financial institutions taken together?
- A. About Rs 2.11 lakh crore
- B. About Rs 2.69 lakh crore
- C. About Rs 2.87 lakh crore
- D. About Rs 3.16 lakh crore
Q12. The Committee headed by Shri N.K. Singh, set up in May 2016 to review the Fiscal Responsibility and Budget Management Act, 2003 and recommend a future FRBM roadmap, consisted of how many members?
- A. Three members
- B. Five members
- C. Seven members
- D. Nine members