Static Quiz 12 June 2023 (Indian Economy)

Solution: B

Justification: These are the regular accruals to the government based on the revenue that does not come from tax. In India they are: Profits and dividends which the government gets from its public sector undertakings (PSUs) Interest, received by the government out of all loans forwarded by it, be it inside the country (i.e., internal lending) or outside the country (i.e., external lending). It means this income might be in both domestic and foreign currencies. Pascal services also generate incomes for the government. i.e., currency printing, stamp printing, coinage, medals, minting, etc. General Services also earn money for the government as the power distribution, irrigation, banking, insurance, community services, etc. Fees, Penalties and Fines received by the government. Grants which the governments receives— it is always external in the case of the Central Government and internal in the case of state governments.

Solution: B

Justification: Option B: It forms part of the revenue receipt. The main items of capital receipts are loans raised by the government from the public which are called market borrowings, borrowing by the government from the Reserve Bank and commercial banks and other financial institutions through the sale of treasury bills, loans received from foreign governments and international organizations, and recoveries of loans granted by the central government. Other items include small savings (Post-Office Savings Accounts, National Savings Certificates, etc.), provident funds and net receipts obtained from the sale of shares in Public Sector Undertakings (PSUs).

Solution: C

Justification: Statement 1: These are receipts of the government which are non-redeemable, that is, they cannot be reclaimed from the government. They are divided into tax and non-tax revenues.
Statement 2: Both tax and non-tax revenue occur annually to the government, i.e. they are a continuous source of income for the government. If there is a source of income that does not recur annually, it is usually classified as capital receipt, because it is generally a one-time receipt.

Solution: C
Justification: The basic identity of such expenditures is that they are of a consumptive kind and do not involve the creation of productive assets. They are either used in the running of a productive processor running a government. A broad category of things that fall under such expenditures in India is: Interest paid by the government on the internal and external loans; Salaries, Pension and Provident Fund paid by the government to government employees; Subsidies forwarded to all sectors by the government; Defense expenditures by the government; Postal Deficits of the government; Law and order expenditures (i.e. police & paramilitary); Expenditures on social services (includes all social sector expenditures as education, health care, social security, poverty alleviation, etc.) and general services (tax collection, etc.); Grants given by the government to Indian states and foreign countries.

Solution: C
Justification: This is expenditure incurred for purposes other than the creation of physical or financial assets of the central government. It relates to those expenses incurred for the normal functioning of the government departments and various services, interest payments on debt incurred by the government, and grants given to state governments and other parties (even though some of the grants may be meant for creation of assets). Apart from providing implicit subsidies through underpricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilizers.