All questions of Public Finance in India for BPSC (Bihar) Exam

Explanation of the Correct Answer
The correct answer is option 'B' (1 and 2 Only). Let's analyze each statement:
Statement 1: Plan expenditures are primarily asset-creating and productive.
- This statement is correct. Plan expenditures are typically associated with government initiatives aimed at economic development, such as infrastructure projects, social programs, and other investments that create assets and foster growth.
Statement 2: The classification of expenditures as Plan and Non-Plan was replaced by Revenue and Capital from the fiscal year 2017-18.
- This statement is also correct. In the fiscal year 2017-18, the Indian government discontinued the distinction between Plan and Non-Plan expenditures. Instead, expenditures are now classified as Revenue (which covers day-to-day operational costs) and Capital (which pertains to investment in assets).
Statement 3: Non-Plan expenditures include investments in new factories and infrastructure projects.
- This statement is incorrect. Non-Plan expenditures generally refer to mandatory expenditures that are not associated with specific plans or projects, such as salaries, pensions, and interest payments. Investments in new factories and infrastructure projects typically fall under Plan or Capital expenditures.
Conclusion
- Therefore, the correct statements are 1 and 2, making option 'B' the right choice. Understanding these classifications is crucial for grasping government budgeting and economic planning in India.

Explanation of the Statements
Statement-I discusses the borrowing powers of the Union and State Governments in India concerning Article 292 and Article 293 of the Constitution.
- Union Government (Article 292):
- Can borrow both domestically and internationally.
- Borrowing is subject to the limits specified by the Parliament.
- State Governments (Article 293):
- Limited to borrowing only within the country.
- This reflects a more controlled financial environment for states.
Statement-II pertains to the nature of Public Debt in India.
- Public Debt of India:
- Comprises both internal and external liabilities.
- However, Statement-II incorrectly states that it includes only the liabilities incurred by the Central Government, neglecting the public debt incurred by State Governments.
Correctness of the Statements
- Statement-I:
- Correct, as it accurately describes the borrowing framework for both Union and State Governments.
- Statement-II:
- Incorrect, because it limits the definition of public debt to only the liabilities of the Central Government and omits the debts of State Governments.
Conclusion
The answer to the question is option 'C':
- Statement-I is correct, but Statement-II is incorrect.
This distinction is crucial in understanding the overall framework of public debt management in India.