Government Borrowings help finance fiscal deficits and development projects. This topic includes internal borrowing, external debt, public debt management and its impact on the economy.
Government borrowing falls under capital receipts in the Budget document.
Government borrows through issue of government securities called G-secs and Treasury Bills.
Which of the statements given above is/are correct?
Correct Answer:
(C) Both 1 and 2
The Government borrowings are classified as capital receipts within a budget document. This is because they create a liability for the government, representing an inflow of funds that are typically used for long-term investments or capital expenditures, not just for day-to-day operations.
Usually, Government borrows through issue of government securities called G-secs and Treasury Bills.
Ques: 2
Loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government, are known as:
Correct Answer:
(B) Off-budget borrowing
Off-budget borrowings are loans taken by public institutions on behalf of the central government, rather than directly by the Centre. These borrowings are used to finance government expenditure but are not included in the official fiscal deficit calculation, as the liability is not formally on the Centre. This helps to keep the country's fiscal deficit within acceptable limits.
Ques: 3
Which of the following statements correct defines the term ‘Off-Budget Debt’?
Correct Answer:
(B) These are borrowings taken not by the Centre directly, but by another public institution on the direction of government.
Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government’s expenditure needs.
Ques: 4
The RBI categorizes budgetary expenditures of both Union and State governments into ‘developmental’ and ‘non-developmental’ expenditures. In this context, consider the following statements:
Developmental expenditures include interest payments, pensions, and subsidies.
Non-developmental expenditures encompass investments in social services.
Which of the statements given above is/are correct?
Correct Answer:
(D)
Neither 1 Nor 2
The RBI categorizes budgetary expenditures of both Union and State governments into ‘developmental’ and ‘non-developmental’ expenditures.
Developmental expenditures encompass investments in social services and economic sectors, while non-developmental expenditures include interest payments, pensions, and subsidies.
Ques: 5
Consider the following statements:
Article 293 covers borrowing by the Central Government.
Article 292 covers borrowing by State Governments.
Which of the statements given above is/are incorrect?
Correct Answer:
(C) Both 1 and 2
Chapter II of Part XII of the Constitution of India deals with borrowing by the Central Government and State Governments.
It comprises two provisions:
Article 292 covers borrowing by the Central Government, and Article 293, covers borrowing by State Governments.
Article 293 (3) requires State Governments that are indebted to the Central Government to seek the consent of the Central Government before raising further borrowings.