UPSC Prelims Practice Questions — Union Budget FY 2026-27: Strengthening Capital Goods Sector

Q1. In the context of the Union Budget FY 2026-27, the term 'effective capital expenditure' of the Union Government refers to which one of the following?

  • A. The Centre's own capital outlay plus grants-in-aid given to States for the creation of capital assets
  • B. The Centre's gross capital outlay minus the loans repaid to it by the States during the year
  • C. Only the direct capital outlay by the Union Government, excluding all transfers to States
  • D. The combined capital expenditure of the Union Government and all States and Union Territories

Q2. With reference to public capital expenditure as presented in the Union Budget FY 2026-27, consider the following statements: 1. The public capital expenditure proposed for FY 2026-27 is ₹12.2 lakh crore. 2. This represents an increase of about 9% over the Budget Estimates of FY 2025-26. 3. The Government's capital outlay has grown nearly 4.2 times from ₹2.63 lakh crore in FY18 to the FY26 Budget Estimate. Which of the statements given above is/are correct?

  1. The public capital expenditure proposed for FY 2026-27 is ₹12.2 lakh crore.
  2. This represents an increase of about 9% over the Budget Estimates of FY 2025-26.
  3. The Government's capital outlay has grown nearly 4.2 times from ₹2.63 lakh crore in FY18 to the FY26 Budget Estimate.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q3. The 'CIE Scheme' introduced in the Union Budget FY 2026-27 is intended to promote domestic manufacturing of which one of the following?

  • A. Construction and Infrastructure Equipment, such as tunnel-boring machines and lifts
  • B. Consumer and Industrial Electronics for the domestic market
  • C. Containers and Intermodal Equipment for maritime trade
  • D. Clean and Integrated Energy systems for green industry

Q4. Among the following capital-goods-related schemes highlighted in the Union Budget FY 2026-27, which one carries the largest budgetary outlay?

  • A. Electronics Components Manufacturing Scheme, as expanded in Budget 2026-27
  • B. Container Manufacturing Scheme
  • C. Scheme on Enhancement of Competitiveness in the Capital Goods Sector, Phase II
  • D. Hi-Tech Tool Rooms programme

Q5. With reference to the National Capital Goods Policy, 2016, consider the following as its stated features/objectives: 1. Increasing capital goods production from about ₹2,30,000 crore (2014-15) to ₹7,50,000 crore by 2025. 2. Raising direct and indirect employment in the sector from 8.4 million to about 30 million. 3. Expanding the scope of the Scheme on Enhancement of Competitiveness in the Capital Goods Sector. 4. Providing a Production Linked Incentive of ₹1.91 lakh crore to capital goods manufacturers. Which of the statements given above is/are NOT correct?

  1. Increasing capital goods production from about ₹2,30,000 crore (2014-15) to ₹7,50,000 crore by 2025.
  2. Raising direct and indirect employment in the sector from 8.4 million to about 30 million.
  3. Expanding the scope of the Scheme on Enhancement of Competitiveness in the Capital Goods Sector.
  4. Providing a Production Linked Incentive of ₹1.91 lakh crore to capital goods manufacturers.
  • A. 1 and 2
  • B. 2 and 3
  • C. 1 and 4
  • D. 4 only

Q6. With reference to the National Capital Goods Policy, 2016, consider the following statements: 1. It was the first-ever policy framework dedicated to India's capital goods sector. 2. It was announced by the Ministry of Heavy Industries. 3. The Policy itself carried a dedicated financial outlay of ₹1,207 crore for setting up Centres of Excellence. Which of the statements given above is/are correct?

  1. It was the first-ever policy framework dedicated to India's capital goods sector.
  2. It was announced by the Ministry of Heavy Industries.
  3. The Policy itself carried a dedicated financial outlay of ₹1,207 crore for setting up Centres of Excellence.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q7. The following are stated to be components of Phase-II of the Scheme on Enhancement of Competitiveness in the Indian Capital Goods Sector: 1. Setting up of Common Engineering Facility Centres (CEFCs). 2. Setting up of Industry Accelerators. 3. Augmentation of existing Testing and Certification Centres. 4. Direct cash subsidy to end-consumers purchasing domestically made machine tools. Which of the above is/are NOT correct?

  1. Setting up of Common Engineering Facility Centres (CEFCs).
  2. Setting up of Industry Accelerators.
  3. Augmentation of existing Testing and Certification Centres.
  4. Direct cash subsidy to end-consumers purchasing domestically made machine tools.
  • A. 1 and 3
  • B. 2 and 4
  • C. 3 and 4
  • D. 4 only

Q8. With reference to the Scheme on Enhancement of Competitiveness in the Indian Capital Goods Sector, consider the following statements: 1. Phase-II was notified by the Ministry of Heavy Industries in January 2022. 2. Phase-II has a total financial outlay of ₹1,207 crore, including an industry contribution. 3. Phase-I had established 8 Centres of Excellence. 4. Phase-II targets capital goods to contribute at least 50% to the manufacturing sector. Which of the statements given above are correctly identified?

  1. Phase-II was notified by the Ministry of Heavy Industries in January 2022.
  2. Phase-II has a total financial outlay of ₹1,207 crore, including an industry contribution.
  3. Phase-I had established 8 Centres of Excellence.
  4. Phase-II targets capital goods to contribute at least 50% to the manufacturing sector.
  • A. 1 and 4 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1, 3 and 4

Q9. The Production Linked Incentive (PLI) schemes, which have catalysed downstream demand for capital goods, are currently being implemented across how many sectors?

  • A. 10
  • B. 12
  • C. 14
  • D. 16

Q10. The Production Linked Incentive (PLI) scheme framework, which has boosted demand for capital goods across manufacturing, was first rolled out by the Government of India in which year?

  • A. 2016
  • B. 2018
  • C. 2020
  • D. 2022

Q11. The capital goods sector in India, including its Heavy Engineering and Machine Tools segment, is administered primarily by which one of the following?

  • A. Ministry of Heavy Industries (Department of Heavy Industries)
  • B. Ministry of Commerce and Industry (DPIIT)
  • C. Ministry of Micro, Small and Medium Enterprises
  • D. Ministry of Electronics and Information Technology

Q12. The Electronics Components Manufacturing Scheme (ECMS), notified in April 2025, has a scheme tenure of how many years, excluding the optional gestation period?

  • A. Four years
  • B. Five years
  • C. Six years
  • D. Seven years