Minimalist IAS
Economy & social development

Prelims · Economy & social development · 34 questions

Budget, taxation & public finance

Every UPSC Prelims question on this topic, 2016–2026, newest first. Tap an option to check yourself; the answer and explanation open below it.

Budget, taxation & public finance questions per year: 2016: 3, 2017: 3, 2018: 4, 2019: 0, 2020: 1, 2021: 3, 2022: 3, 2023: 1, 2024: 1, 2025: 5, 2026: 1 Asked in 10 of 11 years · most in 2025 (5)

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

Prelims 2024 · Q51

Hard

Consider the following statements:

  1. Statement-I: If the United States of America (USA) were to default on its debt, holders of US Treasury Bonds will not be able to exercise their claims to receive payment.
  2. Statement-II: The USA Government debt is not backed by any hard assets, but only by the faith of the Government.

Which one of the following is correct in respect of the above statements?

Answer & explanation

Answer: (a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I

Why not the tempting option · UPSC's key is (a). A stricter legal reading objects that a default would not extinguish holders' claims — the US Constitution (14th Amendment, section 4) says the validity of the public debt shall not be questioned — so some read Statement-I as incorrect and pick (d). But 'exercise their claims to receive payment' is about actually being paid, which a default by definition prevents, and the absence of any hard asset behind the debt (Statement-II) is precisely why holders would have no recourse. In the exam, read such statements as economics, not as a point of law.

UPSC's key accepts both statements, with Statement-II explaining Statement-I. US Treasury securities carry no collateral; they rest on the full faith and credit of the US government, a promise to pay. A default is a failure to honour that promise, and because nothing but the promise stands behind the bonds, holders would have no asset to claim against and could not get paid.

  • ✓ Statement-I A default means the government does not make the payments due. Holders' claims rest on the government's promise alone, so when the promise fails there is no collateral to seize and no asset to realise: the claim to payment exists but cannot be exercised.
  • ✓ Statement-II The US Treasury states that all its marketable securities are backed by the full faith and credit of the United States government — a pledge of the government's word (reinforced by the constitutional rule that the validity of the public debt 'shall not be questioned'), not of specific assets. That is exactly why Statement-I follows: with no hard asset behind the debt, a default leaves holders with nothing to enforce against.

Remember · US Treasury debt is unsecured: it rests on the government's full faith and credit, not on collateral. That is why a default would leave holders unable to collect — there is no hard-asset fallback.

Sources

Question and answer: UPSC's official GS Paper I (2024, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). Permalink ·

Prelims 2024 · Q85

Medium

With reference to Union Budget, consider the following statements:

  1. 1.The Union Finance Minister on behalf of the Prime Minister lays the Annual Financial Statement before both the Houses of Parliament.
  2. 2.At the Union level, no demand for a grant can be made except on the recommendation of the President of India.

Which of the statements given above is/are correct?

Answer & explanation

Answer: (c) Both 1 and 2

UPSC's official answer: (c) · the answer UPSC accepted, and the one that counts in the exam

Also defensible: (b)

  • Statement 2 is the Constitution's own words: Article 113(3), 'No demand for a grant shall be made except on the recommendation of the President.'
  • Statement 1 says the Finance Minister lays the Annual Financial Statement 'on behalf of the Prime Minister'. Article 112(1) says 'the President shall in respect of every financial year cause to be laid before both the Houses of Parliament' the statement, and Lok Sabha Rule 204 says the Budget 'shall be presented to the House on such day as the President may direct'. In form, the Minister lays it for the President, not the Prime Minister.
  • UPSC's key accepts statement 1 on its substance: the President acts on the advice of the Council of Ministers 'with the Prime Minister at the head' (Article 74), and the Finance Minister presents the Budget for that Government. Hence (c).
  • A reader who holds the statement to the constitutional form, under which the statement is laid on the President's authority, rejects 1 and answers (b).

UPSC's key accepts statement 1 for its substance, the Finance Minister acting for the Government the Prime Minister heads; held to the form of Article 112, it fails and the answer is (b). In the exam, treat a statement as correct when its substance is right and only the form of words is loose.

This box is Minimalist IAS's analysis, with its sources; it does not change UPSC's answer.

Statement 2 is straight from the Constitution: Article 113(3) bars any demand for a grant without the President's recommendation. For statement 1, the Finance Minister lays the Annual Financial Statement before Parliament for the Government, the Council of Ministers headed by the Prime Minister, on whose advice the President 'causes' it to be laid under Article 112. UPSC's key treats both as correct.

  • ✓ 1. Article 112(1) makes the President cause the Annual Financial Statement to be laid before both Houses; under Article 74 the President acts on the advice of the Council of Ministers with the Prime Minister at its head, and the Finance Minister lays the statement on the Government's behalf, presenting the Budget in the Lok Sabha and laying it in the Rajya Sabha.
  • ✓ 2. Article 113(3): no demand for a grant shall be made except on the recommendation of the President. Demands for grants are submitted to the Lok Sabha only in this way.

Remember · Art 112: the President causes the Annual Financial Statement to be laid; the Finance Minister presents the Budget for the Government headed by the Prime Minister. Art 113(3): no demand for a grant without the President's recommendation.

📘 Read it in NCERT: Class 12 Social Change and Development in India, Ch 3 (practise this chapter)

Sources

  • NCERT Class 12 · Social Change and Development in India, Chapter 3 “Every year in February the Finance Minister of the Government of India presents the Budget to the Parliament.”
  • Constitution of India, Article 112(1): 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 … No demand for a grant shall be made except on the recommendation of the President. … There shall be a Council of Ministers with the Prime Minister at the head to aid and advise the President who shall, in the exercise of his functions, act in accordance with such advice”

Question and answer: UPSC's official GS Paper I (2024, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). Permalink ·

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