Question 1

Disinvestment receipts are classified as revenue receipts because they bring income to the government.

Accepted Answer

Disinvestment receipts are classified as capital receipts because they result in a reduction of government assets.

Question 2

A higher fiscal deficit automatically implies poor economic management and inflationary money printing.

Accepted Answer

If the deficit is driven by capital expenditure (like the 4.4 percent of GDP capex), it creates productive assets that increase future income, which is considered 'good quality' deficit.

Question 3

Consider the following statements regarding the Union Budget 2026-27: 1. The capital expenditure target has been set at Rs 12.2 lakh crore, which constitutes approximately 4.4 percent of the GDP. 2. Disinvestment proceeds are classified as revenue receipts because they are non-debt creating inflows. 3. The budget extends the tax holiday for International Financial Services Centre (IFSC) units to 20 years. How many of the above statements are correct?

Accepted Answer

(b) Only two — Statements 1 and 3 are correct. Statement 2 is incorrect. While disinvestment proceeds are indeed non-debt creating inflows, they are classified as capital receipts, not revenue receipts, because they result in the reduction of government assets.

Question 4

Match List I (Budgetary targets/reforms in Budget 2026-27) with List II (Associated figures or details): List I: A. Fiscal Deficit Target for FY27, B. Disinvestment and Asset Monetization Target, C. Share Buyback Taxation change, D. Capital Expenditure. List II: 1. Rs 12.2 lakh crore, 2. Rs 80,000 crore, 3. 4.3 percent of GDP, 4. Shifted to Capital Gains.

Accepted Answer

(a) A-3, B-2, C-4, D-1 — The fiscal deficit is targeted at 4.3 percent of GDP (A-3). The disinvestment target is set at Rs 80,000 crore under miscellaneous capital receipts (B-2). Share buybacks are now taxed as capital gains (C-4). The capital expenditure is Rs 12.2 lakh crore (D-1).

Question 5

Assertion (A): The government's decision to maintain high capital expenditure at Rs 12.2 lakh crore while simultaneously reducing the fiscal deficit to 4.3 percent is an indicator of improving the 'quality of expenditure'. Reason (R): Capital expenditure creates long-term physical and social assets, while fiscal consolidation ensures macroeconomic stability by reducing dependency on debt to fund day-to-day revenue expenditures.

Accepted Answer

(a) Both A and R are true and R is the correct explanation of A — Both statements are true. An increase in the share of capital expenditure out of the total budget implies that borrowed money (deficit) is being used for asset creation rather than consumption. The reason correctly explains why this dual approach enhances economic stability and future productivity.

Union Budget 2026-27 Presentation

SC Reaffirms Mandatory FIR Registration for Cognizable Offences