Passage Based Questions: Government Budget and the Economy | Economics Class 12 - Commerce PDF Download

Passage - 1

Direction: Read the following News Article and answer the questions that follow:

Passage: NEW DELHI: The government on Monday provided a list of 36 public sector companies that the finance ministry has decided “in-principle” to disinvest and privatize. “The Shipping Corporation of India, various Units of India Tourism Development Corporation, Hindustan Antibiotics, Bengal Chemicals & Pharmaceuticals, Bharat Petroleum Corporation Ltd, Alloy Steel Plant, Durgapur; Salem Steel Plant; Bhadrawati Steel Plant - units of Steel Authority of India Limited, IDBI Bank, among the list of 36 PSUs that the government has furnished in Lok Sabha.

Minister of state for finance Bhagwat Kishanrao Karad said in a written reply to the House that, “the government, since 2016, has given ‘in-principle’ approval for strategic disinvestment of 36 CPSEs and/or Subsidiaries/ Units/ Joint Ventures of CPSEs and Banks, a list of which is annexed. The execution and outcome of disinvestment transactions inter alia depends on the prevailing market conditions and bidders’ interest.”

He was replying to a question on “the details of the Public Sector Enterprises, Banks and Financial Institutions that have been enlisted for disinvestment and privatization during the next three financial years and the details of the target amount set to be realized through the said process,” asked by Trinamool Congress MP Mala Roy.

According to the list of CPSEs/ subsidiaries/ Units/ Joint Ventures of CPSEs (Central Public Sector Enterprises) and Banks for which the government has given ‘in-principle’ approval for 36 PSUs for strategic disinvestment since 2016. – IDBI Bank, BPCL among 36 PSUs to get 'in-principle' nod for disinvestment – Times of India – Dec. 13, 2021

Q1: What kind of financial activity is being discussed in the article? Explain.
Ans: In the above article, disinvestment is being discussed, which is a type of capital receipt for the government. Disinvestment is termed as a capital receipt because it involves selling shares of public sector units, leading to a reduction in assets.

Q2: What objective of the government budget is being achieved through the financial activity mentioned in the article?
Ans: The objective of managing Public Enterprises is being accomplished through the receipt mentioned in the article.

Q3: Explain the objective mentioned in the previous question.
Ans: Disinvestment allows the government to improve the management of underperforming public sector units and make them more profitable. It helps to eliminate bureaucratic control, enhance efficiency, and increase profitability of enterprises. Additionally, the funds obtained from disinvestment can be used to boost government capital expenditure and fund welfare programs, thereby reducing income inequality.

Passage -2

Direction: Read the following News Article and answer the questions that follow:

Passage: Asserting that there have been record GST collections in the past few months, Union Finance Minister Nirmala Sitharaman on Monday announced a proposal to remove 400 old exemptions and take every possible measure to reduce anomalies.

Sitharaman’s assertions came a day after the Finance Ministry on Sunday announced that Goods and Services Tax (GST) collections for January 2021 touched an all-time high of ` 1.19 lakh crore since the introduction of GST regime. “A record GST collections have been recorded in the last few months. As chairperson of the GST Council, I want to assure the government will take every possible measure to reduce anomalies. The government is focused to further ease the process,” Sitharaman said during her budgets. “A proposal will be brought to remove 400 old exemptions this year. From October 1, 2021, a revised customs duty structure free of distortions will be there,” she added.

She also said that the definition of small companies will be revised by raising the capital base to 2 crore from the current limit of 50 lakh. – “FM announces removal of 400 old exemptions, measures to reduce anomalies in GST” – The Economic Times – February 01, 2021

Q1: What type of revenue receipt is GST as discussed in the article? Explain.
Ans: GST is a type of Tax Receipt. Goods and Services Tax is an indirect tax levied on goods and services purchased within the country.

Q2: Which objective of the government budget can be achieved through this type of revenue? Explain the objective.
Ans: Reduction of Income Inequality is the objective of the government budget that can be achieved through taxation.

Q3: Explain the objective mentioned in the previous question.
Ans: Taxation, especially through progressive taxation, helps reduce income inequality by collecting more from higher-income individuals and redistributing the wealth. The government can use tax revenue to provide welfare benefits, such as free or subsidized goods and services, to lower-income groups, thus promoting equity and reducing poverty.