Previous Year Question
Which statement is true for Finance Sector (Fiscal Management) in the Union Budget-2023?
Budget estimates 2023-24 for total expenditure is ₹55 lakh Cr.
Fiscal Deficit 2025-26, the target is to be below 5.5%.
Fiscal Deficit of 3.5% of GSDP allowed for states.
Twenty years interest free loans to states.
Correct Answer: C
Detailed Solution
In the Union Budget 2023–24, the Government of India announced that states would be allowed a Fiscal Deficit of up to 3.5% of their Gross State Domestic Product (GSDP). An additional limit of 0.5 percentage points was subject to conditions related to Power Sector Reforms. This announcement was made by Finance Minister Nirmala Sitharaman while presenting the Union Budget on 1 February 2023.
Option (a) is incorrect. The Budget Estimate for Total Expenditure in the Union Budget 2023–24 was approximately ₹45 lakh crore, not ₹55 lakh crore. It included both Revenue Expenditure and Capital Expenditure.
Option (b) is incorrect. The Central Government had set a target to reduce the Fiscal Deficit to below 4.5% of GDP by the financial year 2025–26, not below 5.5%. The Budget Estimate of the Union Fiscal Deficit for 2023–24 was 5.9% of GDP.
Option (c) is correct. States were allowed a Fiscal Deficit of up to 3.5% of GSDP during the financial year 2023–24. This included a normal limit of 3.0% and an additional 0.5 percentage points subject to the implementation of prescribed Power Sector Reforms. These reforms aimed to improve the financial and operational efficiency of the power distribution sector.
Option (d) is incorrect. The Union Budget 2023–24 announced a 50-year Interest-Free Loan for states to support Capital Investment, not a 20-year loan. The objective of this loan was to promote investment in infrastructure and other capital projects.
Fiscal Deficit is the difference between the government's total expenditure and its total receipts excluding borrowings. It indicates the amount of borrowing required by the government to finance its expenditure. For states, it is expressed as a percentage of GSDP, while for the Central Government, it is expressed as a percentage of GDP.