Q180. In fiscal policy, what does the crowding-out effect principally mean?
[UPSC CSE Prelims 2026]
(A) Public borrowing stimulates additional private investment
(B) Government borrowing raises interest rates and reduces private investment
(C) Higher taxes necessarily increase private capital formation
(D) Government expenditure has no effect on aggregate demand
Answer: (B) Government borrowing raises interest rates and reduces private investment
Explanation: When the government borrows heavily, demand for available loanable funds may rise, pushing up financing costs for firms. As private projects become less profitable at higher interest rates, some investments are deferred. This displacement is called crowding out.
Q179. What fiscal-deficit target, as a share of GDP, did Union Budget 2026–27 announce?
[RRB Group D, 4 August 2026, Shift 3]
(A) 6.0%
(B) 5.2%
(C) 3.5%
(D) 4.3%
Answer: (D) 4.3%
Explanation: The Union Budget for 2026–27 projected the fiscal deficit at 4.3% of GDP. This ratio compares the government’s borrowing requirement with total economic output, allowing comparisons between financial years even when expenditure and nominal GDP change.
Q178. What share of the divisible pool of central taxes did the Sixteenth Finance Commission recommend for States during 2026–31?
[RRB Group D, 9 August 2026, Shift 3]
(A) 32%
(B) 51%
(C) 54%
(D) 41%
Answer: (D) 41%
Explanation: The Sixteenth Finance Commission retained a 41% vertical tax devolution recommendation for States. The divisible pool comprises shareable Union tax proceeds after constitutional exclusions. This percentage concerns allocation between Centre and States, not distribution among individual States.
Q177. Consider the Finance Commission:
I. It is quasi-judicial.
II. It is associated with Article 280.
III. The President constitutes it.
IV. It is formed after every six years.
Which statements are correct?
[RRB NTPC (Graduate) CBT-I, 27 March 2026, Shift 2]
(A) I, II and III only
(B) I and II only
(C) II and III only
(D) IV only
Answer: (A) I, II and III only
Explanation: Article 280 provides for a Finance Commission constituted by the President every five years, or earlier when required. The institution recommends revenue sharing and grants. Thus the first three assertions are correct; the six-year interval is not constitutional.
Q176. What is a principal objective of fiscal policy in India?
[RRB NTPC (Undergraduate) CBT-I, 9 May 2026, Shift 2]
(A) Increasing inflation
(B) Economic growth and stability
(C) Increasing the fiscal deficit
(D) Restricting all foreign trade
Answer: (B) Economic growth and stability
Explanation: Fiscal policy manages public expenditure, taxation and government borrowing to influence demand, employment and resource allocation. Its broad purpose is sustainable growth with macroeconomic stability, not automatically raising prices or deficits. Measures can be expansionary or contractionary depending on circumstances.
Q175. What was the primary purpose of introducing state-level VAT in India before GST?
[SSC GD Constable, 20 May 2026, Shift 1]
(A) Replacing all direct taxes with one levy
(B) Reducing the cascading effect of indirect taxes
(C) Expanding fiscal deficits
(D) Protecting domestic producers solely through higher customs tariffs
Answer: (B) Reducing the cascading effect of indirect taxes
Explanation: Value Added Tax allowed input-tax adjustment against tax payable on sales, thereby curbing the tax-on-tax problem. It preceded GST and modernised state sales taxation. VAT did not replace income tax or serve mainly as a protective import tariff.
Q174. Which colonial legislation first permitted discussion of the budget in Indian legislative councils?
[SSC GD Constable, 22 May 2026, Shift 3]
(A) Indian Councils Act, 1892
(B) Indian Councils Act, 1861
(C) Indian Councils Act, 1909
(D) Government of India Act, 1919
Answer: (A) Indian Councils Act, 1892
Explanation: The Indian Councils Act of 1892 expanded legislative councils and permitted discussion of the annual financial statement, although members could not vote on it. This was an early step in legislative scrutiny of public finances under British rule.
Q173. Under the Union Budget 2025–26 announcement, what ordinary-income threshold attracted no tax after rebate under the new income-tax regime?
[RRB Group D, 8 January 2026, Shift 1]
(A) ₹12 lakh
(B) ₹10 lakh
(C) ₹15 lakh
(D) ₹13 lakh
Answer: (A) ₹12 lakh
Explanation: The Budget raised the rebate mechanism so eligible resident individuals with ordinary taxable income up to ₹12 lakh paid no income tax under the new regime. This effective relief results from the section 87A rebate, not a zero-rate slab up to ₹12 lakh.
Q172. Before the insurance-premium GST exemption proposal discussed in 2025, what GST rate applied to health insurance premiums?
[RRB Group D, 10 February 2026, Shift 1]
(A) 10%
(B) 12%
(C) 5%
(D) 18%
Answer: (D) 18%
Explanation: Health-insurance premiums had generally attracted 18% GST before the proposed exemption became a policy issue in 2025. The question concerns the historical rate, not the later applicable position. Indirect taxes are borne through the price of the taxable service.
Q171. Which Union Budget 2025–26 initiative aimed to monetise public assets worth ₹10 lakh crore by 2030?
[RRB Group D, 2 February 2026, Shift 2]
(A) Swachh Bharat Mission
(B) Postal Life Insurance
(C) Second Asset Monetisation Plan
(D) National Agriculture Market
Answer: (C) Second Asset Monetisation Plan
Explanation: The Second Asset Monetisation Plan was announced to unlock value from existing infrastructure and mobilise capital for additional projects. Monetisation does not necessarily mean permanent privatisation: it can transfer operating or revenue rights for a defined period.