Ramesh Singh Test : Public Finance In India

(i) Revised Estimate (RE) Revised Estimate is a current estimation of either the budgetary estimates (BE) or the provisional estimates (PE). It shows the contemporary situation.

(ii) Quick Estimate (QE) Quick Estimate is a kind of revised estimate which shows the most latest situation and is useful in the process of going for future projections for some sector or sub-sector. It is interim data.

(iii) Advance Estimate (AE) Advance Estimate is a kind of quick estimate but done ahead (in advance) of the final stage when it should have been collected. It is interim data.

Developmental and Non-developmental Expenditure: Total expenditure incurred by the government is classified into two segments-developmental and non-developmental.

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  All expenditures of productive nature are developmental such as on the heads of new factories, dams, bridges, roads, railways, etc.—all investments.

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  The expenditures which are of a consumptive kind and do not involve any production are non-developmental, i.e., paying salaries, pensions, interest payments, subsidies, defence expenses, etc. This classification is not used in the Indian public finance management now.

Tax Revenue Receipts: This includes all money earned by the government via the different taxes the government collects, i.e., all direct and indirect tax collections.

Non-tax Revenue Receipts: This includes all money earned by the government from sources other than taxes. In India they are:

(i) Profits and dividends which the government gets from its public sector undertakings (PSU).

(ii) Interests 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.

(iii) Fiscal services also generate incomes for the government, i.e., currency printing, stamp printing, coinage and medals minting, etc.

(iv) General Services also earn money for the government as the power distribution, irrigation, banking, insurance, community services, etc.

(v) Fees, Penalties and Fines received by the government.

(vi) Grants which the governments receive are always external in the case of the Central Government and internal in the case of state governments.

Revenue Expenditure: All expenditures incurred by the government are either of revenue kind or current kind or compulsive kind. The basic identity of such expenditures is that they are of a consumptive kind and do not involve the creation of productive assets. A broad category of things that fall under such expenditures in India are:

(i) Interest paid by the government on the internal and external loans;

(ii) Salaries, Pension and Provident Fund paid by the government to government employees;

(iii) Subsidies forwarded to all sectors by the government;

(iv) Defence expenditures by the government;

(v) Postal Deficits of the government;

(vi) Law and order expenditures (i.e., police & paramilitary);

(vii) Expenditures on social services (includes all social sector expenditures as education, health care, social security, poverty etc)

(viii) Grants given by the government to Indian states and foreign countries.

• Effective revenue deficit (ERD) is a new introduction in the Union Budget 2011-12. Conventionally, revenue deficit (RD) is the difference between revenue receipts and revenue expenditures. According to the Finance Ministry (Union Budget 2011-12), such revenue expenditures contribute to the growth in the economy and therefore, should not be treated as unproductive like other items in the revenue expenditures. And on this logic, a new methodology was introduced to capture the effective revenue deficiť, which is the Revenue Deficit 'excluding those revenue expenditures of the Government of India were done in the form of GCA (grants for creation of capital assets).

The correct option is:

1. None of them

Both statements are correct.

The Capital Budget is a part of the overall government budget that deals with the receipts and expenditures of the capital by the government. It shows how the capital is managed and the areas where the capital is spent. The capital expenditure is incurred on the creation of assets like roads, buildings, machinery, and equipment that have a long-term life and can generate economic benefits over an extended period. The Capital Budget is an essential tool for the government to promote economic growth and development by investing in infrastructure and other development projects.

Fiscal policy includes actions taken by the government to influence the level of spending, taxation, and borrowing in the economy. This includes reducing the income tax rate and increasing the salaries of government employees. It does not include reducing the repo rate of the RBI, which is a monetary policy tool used by the Reserve Bank of India.

• Golden rule: The proposition that a government should borrow only to invest (i.e., plan expenditure in India) and not finance current spending (i.e., revenue expenditure in India) is known as the golden rule of public finance.

• Balanced Budget: A budget is said to be a balanced budget when total public sector spending equals total government income (revenue receipts) during the same period from taxes and charges for public services.

• Gender Budgeting: A general budget by the government which allocates funds and responsibilities based on gender is gender budgeting. It is done in an economy where socioeconomic disparities are chronic and visible on a sex basis (as in India).