MCQ on Indian Fiscal System
Q1. Which of the following is the primary source of revenue for the central government in India?
a) Corporate tax
b) Income tax
c) Goods and Services Tax (GST)
d) Customs duty
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Correct Answer: c) Goods and Services Tax (GST)
Explanation: The Goods and Services Tax (GST) is the primary source of revenue for the central government in India. It is an indirect tax levied on the supply of goods and services, replacing multiple taxes like excise duty, service tax, and value-added tax (VAT).
Q2. Which of the following is the primary source of revenue for the state governments in India?
a) Corporate tax
b) Income tax
c) State Goods and Services Tax (SGST)
d) Customs duty
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Correct Answer: c) State Goods and Services Tax (SGST)
Explanation: The State Goods and Services Tax (SGST) is the primary source of revenue for the state governments in India. It is a component of the Goods and Services Tax (GST) system and is levied on the supply of goods and services within a state.
Q3. Which of the following is a major component of the Indian fiscal system?
a) Government budget
b) Monetary policy
c) Foreign exchange reserves
d) Balance of payments
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Correct Answer: a) Government budget
Explanation: The government budget is a major component of the Indian fiscal system. It is a statement of the government’s estimated receipts and expenditures for a financial year and is used to manage public finances, promote economic growth, and ensure social justice.
Q4. Which of the following is a primary objective of fiscal policy in India?
a) Controlling inflation
b) Promoting economic growth
c) Ensuring financial stability
d) All of the above
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Correct Answer: d) All of the above
Explanation: The primary objectives of fiscal policy in India include controlling inflation, promoting economic growth, and ensuring financial stability. Fiscal policy involves the use of government spending, taxation, and borrowing to influence the economy and achieve these objectives.
Q5. Which of the following is a major component of the Indian fiscal system?
a) Public debt
b) Monetary policy
c) Foreign exchange reserves
d) Balance of payments
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Correct Answer: a) Public debt
Explanation: Public debt is a major component of the Indian fiscal system. It refers to the total amount of money borrowed by the central and state governments to finance their budget deficits and meet their expenditure requirements.
Q6. Which of the following is a major challenge faced by the Indian economy in terms of fiscal management?
a) High fiscal deficit
b) Low fiscal deficit
c) High revenue deficit
d) Low revenue deficit
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Correct Answer: a) High fiscal deficit
Explanation: A major challenge faced by the Indian economy in terms of fiscal management is the high fiscal deficit. The fiscal deficit occurs when the government’s total expenditure exceeds its total revenue, excluding borrowing. A high fiscal deficit can lead to inflationary pressures, increased public debt, and reduced private investment.
Q7. Which of the following is a major government initiative aimed at reducing the fiscal deficit in India?
a) Fiscal Responsibility and Budget Management (FRBM) Act
b) Goods and Services Tax (GST)
c) Direct Benefit Transfer (DBT) Scheme
d) All of the above
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Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to reduce the fiscal deficit, including the Fiscal Responsibility and Budget Management (FRBM) Act, which sets targets for the government’s fiscal deficit, revenue deficit, and debt levels; the Goods and Services Tax (GST), which aims to simplify the tax structure and increase tax revenue; and the Direct Benefit Transfer (DBT) Scheme, which aims to improve the efficiency of government subsidies and reduce leakages.
Q8. Which of the following is a major challenge faced by the Indian economy in terms of revenue mobilization?
a) High tax compliance
b) Low tax compliance
c) High tax rates
d) Low tax rates
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Correct Answer: b) Low tax compliance
Explanation: A major challenge faced by the Indian economy in terms of revenue mobilization is low tax compliance. Tax evasion and avoidance, along with a large informal sector, contribute to low tax compliance, which in turn affects the government’s ability to generate sufficient revenue to finance its expenditure.
Q9. Which of the following is a major government initiative aimed at improving tax compliance in India?
a) Goods and Services Tax (GST)
b) Income Declaration Scheme (IDS)
c) Direct Benefit Transfer (DBT) Scheme
d) All of the above
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Correct Answer: a) Goods and Services Tax (GST)
Explanation: The Goods and Services Tax (GST) is a major government initiative aimed at improving tax compliance in India. By simplifying the tax structure and implementing a comprehensive indirect tax system, GST aims to increase tax compliance, reduce tax evasion, and broaden the tax base.
Q10. Which of the following is a major challenge faced by the Indian economy in terms of public expenditure management?
a) High levels of public expenditure
b) Low levels of public expenditure
c) High levels of targeted expenditure
d) Low levels of targeted expenditure
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Correct Answer: d) Low levels of targeted expenditure
Explanation: A major challenge faced by the Indian economy in terms of public expenditure management is the low levels of targeted expenditure. Inefficient allocation and utilization of public funds, along with leakages and corruption, can lead to wastage of resources and limit the effectiveness of government programs and schemes.
Q11. Which of the following is a major government initiative aimed at improving public expenditure management in India?
a) Direct Benefit Transfer (DBT) Scheme
b) Outcome Budgeting
c) Zero-Based Budgeting (ZBB)
d) All of the above
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Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to improve public expenditure management, including the Direct Benefit Transfer (DBT) Scheme, which aims to improve the efficiency of government subsidies and reduce leakages; Outcome Budgeting, which focuses on the outcomes of government programs and schemes rather than just the inputs; and Zero-Based Budgeting (ZBB), which requires a thorough review and justification of all budget items, ensuring that resources are allocated efficiently.
Q12. Which of the following is a major challenge faced by the Indian economy in terms of fiscal federalism?
a) High levels of fiscal autonomy for states
b) Low levels of fiscal autonomy for states
c) High levels of fiscal coordination between the center and states
d) Low levels of fiscal coordination between the center and states
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Correct Answer: b) Low levels of fiscal autonomy for states
Explanation: A major challenge faced by the Indian economy in terms of fiscal federalism is the low levels of fiscal autonomy for states. The central government plays a dominant role in revenue mobilization and expenditure allocation, which can limit the ability of states to respond to their specific needs and priorities.
Q13. Which of the following is a major government initiative aimed at promoting fiscal federalism in India?
a) Fourteenth Finance Commission (FFC)
b) Goods and Services Tax (GST)
c) NITI Aayog
d) All of the above
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Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to promote fiscal federalism, including the recommendations of the Fourteenth Finance Commission (FFC), which increased the share of states in central tax revenues; the Goods and Services Tax (GST), which aims to create a unified national market and promote cooperative federalism; and the NITI Aayog, which serves as a platform for policy-making and fosters collaboration between the center and states.
Q14. Which of the following is a major challenge faced by the Indian economy in terms of fiscal sustainability?
a) High levels of public debt
b) Low levels of public debt
c) High levels of fiscal deficit
d) Low levels of fiscal deficit
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Correct Answer: a) High levels of public debt
Explanation: A major challenge faced by the Indian economy in terms of fiscal sustainability is the high levels of public debt. High public debt can lead to increased borrowing costs, reduced private investment, and lower economic growth in the long run.
Q15. Which of the following is a major government initiative aimed at promoting fiscal sustainability in India?
a) Fiscal Responsibility and Budget Management (FRBM) Act
b) Goods and Services Tax (GST)
c) Direct Benefit Transfer (DBT) Scheme
d) All of the above
Show Answer
Correct Answer: a) Fiscal Responsibility and Budget Management (FRBM) Act
Explanation: The Fiscal Responsibility and Budget Management (FRBM) Act is a major government initiative aimed at promoting fiscal sustainability in India. The Act sets targets for the government’s fiscal deficit, revenue deficit, and debt levels, aiming to ensure fiscal discipline and macroeconomic stability.
Q16. Which of the following is a major challenge faced by the Indian economy in terms of tax revenue mobilization?
a) High levels of tax compliance
b) Low levels of tax compliance
c) High levels of tax rates
d) Low levels of tax rates
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Correct Answer: b) Low levels of tax compliance
Explanation: Low levels of tax compliance is a major challenge faced by the Indian economy in terms of tax revenue mobilization. While there is considerable scope to raise additional tax revenue, weak tax compliance, reflecting both structural features and challenges in revenue administration, plays a significant role in tax revenue shortfalls. In addition, tax policy design, notably low tax rates and pervasive tax exemptions, is another important factor driving tax revenue shortfalls.
Q17. Which of the following is a major government initiative aimed at improving tax compliance in India?
a) Goods and Services Tax (GST)
b) Income Declaration Scheme (IDS)
c) Direct Benefit Transfer (DBT) Scheme
d) All of the above
Show Answer
Correct Answer: a) Goods and Services Tax (GST)
Explanation: The Goods and Services Tax (GST) is a major government initiative aimed at improving tax compliance in India. By simplifying the tax structure and implementing a comprehensive indirect tax system, GST aims to increase tax compliance, reduce tax evasion, and broaden the tax base.
Q18. Which of the following is a major challenge faced by the Indian economy in terms of public expenditure management?
a) High levels of public expenditure
b) Low levels of public expenditure
c) High levels of targeted expenditure
d) Low levels of targeted expenditure
Show Answer
Correct Answer: d) Low levels of targeted expenditure
Explanation: A major challenge faced by the Indian economy in terms of public expenditure management is the low levels of targeted expenditure. Inefficient allocation and utilization of public funds, along with leakages and corruption, can lead to wastage of resources and limit the effectiveness of government programs and schemes.
Q19. Which of the following is a major government initiative aimed at promoting the development of the Indian insurance market?
a) Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
b) Pradhan Mantri Suraksha Bima Yojana (PMSBY)
c) Atal Pension Yojana (APY)
d) All of the above
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Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to promote the development of the Indian insurance market, including the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which provides life insurance coverage; the Pradhan Mantri Suraksha Bima Yojana (PMSBY), which offers accident insurance coverage; and the Atal Pension Yojana (APY), which provides pension benefits to the unorganized sector.
Q20. Which of the following is a major challenge faced by the Indian economy in terms of the development of the pension market?
a) High levels of pension coverage
b) Low levels of pension coverage
c) High levels of pension awareness
d) Low levels of pension awareness
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Correct Answer: b) Low levels of pension coverage
Explanation: Low levels of pension coverage are a major challenge faced by the Indian economy in terms of the development of the pension market. Limited access to pension products, particularly for those from economically disadvantaged backgrounds and the unorganized sector, can hinder retirement planning and contribute to income inequality in old age.