Prelims · Economy & social development · 34 questions

Budget, taxation & public finance

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UPSC syllabus: “Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.” See the full syllabus →

Prelims 2020 · Q6

Easy

Along with the Budget, the Finance Minister also places other documents before the Parliament which include 'The Macro Economic Framework Statement'. The aforesaid document is presented because this is mandated by

Answer & explanation

Answer: (d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003

The Macro-Economic Framework Statement is one of the fiscal policy statements that the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 requires the Central Government to lay before both Houses along with the annual Budget. The Constitution requires the Budget itself, not this statement.

✓ (d) The FRBM Act, 2003 requires the Medium-term Fiscal Policy Statement, the Fiscal Policy Strategy Statement and the Macro-Economic Framework Statement to accompany the annual financial statement; the last assesses GDP growth, the Centre's fiscal balance and the external balance.
✗ (b) Article 112 requires the 'annual financial statement' (the Budget), and Article 110(1) defines a Money Bill; neither mentions a macro-economic framework statement.
✗ (c) Article 113 lays down how Parliament deals with the estimates, including voting on demands for grants in the Lok Sabha; it does not require this statement.

Remember · FRBM Act, 2003: fiscal policy statements laid with the Budget include the Medium-term Fiscal Policy Statement, the Fiscal Policy Strategy Statement and the Macro-Economic Framework Statement.

📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)

Sources

NCERT Class 12 · Introductory Macroeconomics, Chapter 5 “Along with the budget, three policy statements are mandated by the Fiscal Responsibility and Budget Management Act, 2003 (FRBMA).”
NCERT Class 12 · Introductory Macroeconomics, Chapter 5 “The central government to lay before both Houses of Parliament three statements – Medium-term Fiscal Policy Statement, The Fiscal Policy Strategy Statement, The Macroeconomic Framework Statement along with the Annual Financial Statement.”
Constitution of India, Article 112 (Annual financial statement) ↗ “The President shall in respect of every financial year cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2020 · Q61

Hard

In India, which of the following can be considered as public investment in agriculture?

1.Fixing Minimum Support Price for agricultural produce of all crops
2.Computerization of Primary Agricultural Credit Societies
3.Social Capital development
4.Free electricity supply to farmers
5.Waiver of agricultural loans by the banking system
6.Setting up of cold storage facilities by the governments

Select the correct answer using the code given below:

Answer & explanation

Answer: (c) 2, 3 and 6 only

Public investment in agriculture means government spending that builds lasting capacity, such as institutions and infrastructure. Computerising PACS and building cold storage do this, whereas MSP, free electricity and loan waivers are price support or subsidies that add no new capacity.

✗ 1. MSP is a price-support instrument, not investment. NITI Aayog treats price support as a separate policy tool from subsidies and public investment.
✓ 2. Primary Agricultural Credit Societies are cooperative institutions, and public spending on cooperative institutions counts as public investment. Computerising them is a Government of India project with its own outlay, and it builds institutional capacity.
✓ 3. UPSC's official key treats this statement as correct; we could not confirm the detail from an official source, so we do not explain it here. It is a different kind of item from the price-support and subsidy options.
✗ 4. Free or cheap power to farmers is a subsidy; NITI Aayog lists power subsidy (borne by State Governments) among the major subsidies, not investments.
✗ 5. A loan waiver only writes off existing debt and creates no new asset or capacity; it is a fiscal relief measure, not investment.
✓ 6. Cold storage is physical post-harvest infrastructure that cuts wastage and raises farmers' realisation; government schemes finance it as infrastructure investment.

Remember · Public investment in agriculture = asset- and institution-building spending (irrigation, R&D, cooperatives, storage). MSP, free power and loan waivers are support or subsidies.

📘 Read it in NCERT: Class 12 Indian Society, Ch 5 (practise this chapter) · Class 11 Indian Economic Development, Ch 3 (practise this chapter)

Sources

NITI Aayog, From Green Revolution to Amrit Kaal: Agriculture (2023), Section 1.6 Subsidies and Investments ↗ “The second policy instrument – public investment in agriculture – includes public expenditure on medium, major and minor irrigation, agriculture R&D and extension, cooperative institutions, and land and soil improvement programmes. … The other major subsidies provided to the agriculture sector are: interest subvention on institutional agricultural credit, subsidy on crop insurance and subsidy on power supply to agriculture (which is borne by State Governments).”
PIB, Ministry of Cooperation: Primary Agriculture Cooperative Credit Societies ↗ “Centrally Sponsored Project for Computerization of PACS entails bringing all the functional PACS onto an ERP (Enterprise Resource Planning) based common national software, linking them with NABARD through State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs)”
PIB, Ministry of Agriculture and Farmers Welfare: Agriculture Infrastructure Fund ↗ “Infrastructure such as warehouses, cold storage, sorting and grading units, and ripening chambers enhances farmers’ ability to access wider markets and improve value realization, thereby boosting their income.”
NCERT Class 12 · Indian Society, Chapter 5 “social capital in the form of networks of contacts and social associations (Bourdieu 1986).”
NCERT Class 11 · Indian Economic Development, Chapter 3 “public investment in agriculture sector especially in infrastructure, which includes irrigation, power, roads, market linkages and research and extension”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). Permalink ·

The same topic in Mains

Government budgetingGS 3 syllabus

Read it in NCERT

Class 12 Introductory Macroeconomics, Chapter 5cited in 2 explanations
Class 12 Indian Society, Chapter 5cited in 1 explanation
Class 11 Indian Economic Development, Chapter 3cited in 1 explanation

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