BPSC 69th CCE Prelims General Studies · Question 125 of 144

Correct — A, Only 1. All three statements are cut out of a single sentence of the Economic Survey 2022-23, Chapter III ("Fiscal Developments — Revenue Relish"), para 3.4, page 43, and the setter has altered two of the three. The Survey says, word for word: "The fiscal deficit of the Union Government, which reached 9.2 per cent of GDP during the pandemic year FY21, has moderated to 6.7 per cent of GDP in FY22 PA and is further budgeted to reach 6.4 per cent of GDP in FY23... This gradual decline... is a result of careful fiscal management supported by buoyant revenue collection over the last two years." Statement 1 reproduces the 9.2 per cent FY21 figure exactly, and the Survey's own Figure III.1 puts that year in context — the Centre's fiscal deficit ran 3.5 per cent of GDP in FY18, 3.4 per cent in FY19 and 4.7 per cent in FY20 before the pandemic doubled it. Statement 1 is therefore correct. Statement 2 says 7.7 per cent for FY22; the Survey's figure is 6.7 per cent on Provisional Actuals, a full percentage point lower, and 7.7 per cent appears nowhere in the FY18–FY23 series. Statement 3 inverts the Survey's own clause. Far from falling, revenue was the reason the deficit came down: Table III.1 shows Gross Tax Revenue at ₹17.81 lakh crore for April–November 2022 against ₹15.42 lakh crore a year earlier — 15.5 per cent growth — with direct taxes up 23.9 per cent and gross GST collections up 24.8 per cent year on year over April–December 2022. There is one honest nuance a careful student should hold: two individual heads did fall over those eight months — Union excise duties by 20.9 per cent, after the excise cuts on petrol and diesel, and non-tax revenue by 11.1 per cent on a smaller RBI surplus transfer — but the aggregate that the Survey's sentence is about rose sharply all the same. So statement 1 stands alone and the answer is (a).

• (b)1 and 2 — The trap that catches most candidates, because both numbers look plausible and the shape of the story — a huge pandemic deficit that then narrows — is exactly right. Only the FY22 digit is wrong: the Economic Survey 2022-23 records 6.7 per cent of GDP on Provisional Actuals, not 7.7 per cent. The gap matters in money, not just in decimals: one percentage point of India's roughly ₹236 lakh crore nominal GDP in FY22 is over ₹2.3 lakh crore of borrowing. A candidate who remembers the narrative but not the figure picks this option.
• (c)2 and 3 — Doubly wrong, and internally incoherent besides. It keeps the altered 7.7 per cent figure and adds the claim that revenue collection fell — when the Survey's stated reason for the deficit narrowing is buoyant revenue, with Gross Tax Revenue up 15.5 per cent year on year over April–November 2022. This option would only make sense if the consolidation had come from slashing expenditure against a shrinking revenue base; in fact the Centre's capital expenditure rose from a long-run average of 1.7 per cent of GDP to 2.5 per cent of GDP in FY22.
• (d)None of the above — Tempting to a candidate who notices that two of the three statements have been doctored and concludes the whole set must be fabricated — a reasonable instinct on a paper that likes altered figures, but wrong here. Statement 1 is quoted accurately. A fiscal deficit of 9.2 per cent of GDP in FY21 is the actual Union figure for 2020-21, the widest since the 1990-91 balance-of-payments crisis, and the number the Economic Survey itself repeats in both its chapter text and Figure III.1. One accurate statement is enough to rule this out.

The fiscal deficit is the gap between the Union Government's total expenditure and its total non-debt receipts — tax revenue net of the States' share, non-tax revenue such as the RBI's surplus transfer, and non-debt capital receipts such as disinvestment. It is therefore exactly the sum the Centre must borrow in that year, which is why it is the headline number of every Budget, and it is expressed as a percentage of GDP so that years of very different size can be compared. The Fiscal Responsibility and Budget Management Act, 2003 built the statutory discipline around it, and the pandemic went straight through that discipline: FY21 hit the ratio from both ends at once, because relief and health spending pushed the numerator up while lockdowns shrank the denominator, so a deficit of 4.7 per cent of GDP in FY20 became 9.2 per cent in FY21. The years since have been a managed retreat along a declared "glide path" — 6.7 per cent in FY22, 6.4 per cent in FY23, 5.9 per cent budgeted for FY24, and a stated intention to go below 4.5 per cent of GDP by 2025-26. The Centre's total liabilities followed the same arc, from 59.2 per cent of GDP in FY21 down to 56.7 per cent in FY22. The Economic Survey's fiscal chapter, tabled each January on the eve of the Budget, is where that path is laid out, and it is the document this question was written from.

This is not really an economics question — it is a reading-accuracy question, and it rewards a candidate who has read the Economic Survey rather than a summary of it. Every statement comes from one sentence of para 3.4; the setter changed a single digit in the second and reversed the sense of the third. The single discriminating fact is the FY22 number: 6.7 per cent of GDP, not 7.7. Fix that and statements 2 and 3 fall together, because the same sentence that carries 6.7 also carries "supported by buoyant revenue collection over the last two years", which contradicts statement 3 in the Survey's own words. There is also a purely logical check for anyone who cannot recall the figure. A deficit cannot narrow by two and a half percentage points of GDP while revenue is falling, unless expenditure has been cut hard — and FY22 was the year the Centre pushed capital expenditure to 2.5 per cent of GDP, its highest in more than a decade. Statements 2 and 3 are thus implausible as a pair, which eliminates option (c) on reasoning alone; and since statement 1 is the one every current-affairs compilation carried that year, option (d) goes too. That leaves (a) and (b), decided by one digit. Note also the abbreviation: "PA" means Provisional Actuals, the Controller General of Accounts' unaudited full-year figure, which is why the Survey's FY22 number differs slightly from the earlier Revised Estimate.

• Economic Survey 2022-23, Ch. III para 3.4 (p. 43): the Union fiscal deficit "reached 9.2 per cent of GDP during the pandemic year FY21, has moderated to 6.7 per cent of GDP in FY22 PA and is further budgeted to reach 6.4 per cent of GDP in FY23" — the sentence this whole question was built from
• The Centre's fiscal deficit series in Figure III.1 of the same Survey: 3.5 per cent of GDP in FY18, 3.4 per cent in FY19, 4.7 per cent in FY20, 9.2 per cent in FY21, 6.7 per cent in FY22 PA and 6.4 per cent budgeted for FY23; the matching primary deficit peaked at 5.7 per cent of GDP in FY21
• Gross Tax Revenue for April–November 2022 was ₹17.81 lakh crore against ₹15.42 lakh crore a year earlier — 15.5 per cent growth, with direct taxes up 23.9 per cent and GST up 23.1 per cent (Table III.2); gross GST collections rose 24.8 per cent year on year over April–December 2022
• By end-November 2022 the Centre had used only 58.9 per cent of its budgeted full-year fiscal deficit, against a five-year moving average of 104.6 per cent for the same eight months — the Survey's evidence that the FY23 target would be met
• Not every revenue head rose: over April–November 2022 Union excise duties fell 20.9 per cent year on year after the excise cuts on petrol and diesel, and non-tax revenue fell 11.1 per cent, yet Gross Tax Revenue still grew 15.5 per cent on the strength of direct taxes and GST
• Union Budget 2023-24 (speech paras 114 and 116): the FY23 Revised Estimate was 6.4 per cent of GDP and the FY24 Budget Estimate 5.9 per cent, with the intention — first announced in the 2021-22 Budget — of bringing the fiscal deficit below 4.5 per cent of GDP by 2025-26

• Mixing up FY21 (2020-21, the pandemic year, 9.2 per cent) with FY22 (2021-22, 6.7 per cent) — the Economic Survey's FY-numbering names the year in which the financial year ends
• Assuming a falling deficit implies falling expenditure or falling revenue; here the deficit narrowed while both revenue and capital expenditure rose
• Reading 'moderated' as 'brought under control' — 6.7 per cent of GDP was still more than double the old FRBM benchmark of 3 per cent

BPSC lifts a sentence out of the most recent Economic Survey and doctors it — changes one digit, or flips a clause from positive to negative — so the paper rewards someone who has actually read the Survey's fiscal chapter rather than an economics textbook, and it rewards remembering figures to one decimal place. Expect the same treatment for the Survey's growth projection, the CAD, the debt-to-GDP ratio and the capex number. UPSC almost never tests the raw figure. It asks what a deficit measures, how one deficit is derived from another, or whether a stated multi-year trend holds — as in 2017, when it offered two trend claims about tax-to-GDP and deficit-to-GDP and the answer was that neither was true.

• practice — not a real PYQ

  The Economic Survey 2022-23 attributed the moderation in the Union Government's fiscal deficit after FY21 primarily to which of the following?

  • (a)A sharp reduction in the Centre's capital expenditure
  • (b)Buoyant revenue collection over the preceding two years
  • (c)A large one-time transfer of surplus from the Reserve Bank of India
  • (d)Suspension of the Fiscal Responsibility and Budget Management Act

  Answer(b) Buoyant revenue collection over the preceding two years — para 3.4 of the Survey names exactly this, and Gross Tax Revenue grew 15.5 per cent year on year over April–November 2022 while capital expenditure rose rather than fell.

• practice — not a real PYQ

  Which of the following correctly defines the primary deficit?

  • (a)Fiscal deficit minus interest payments
  • (b)Revenue deficit minus grants for creation of capital assets
  • (c)Total expenditure minus total revenue receipts
  • (d)Fiscal deficit minus market borrowings

  Answer(a) Fiscal deficit minus interest payments — it measures the current year's borrowing need stripped of the cost of servicing past debt. Option (b) defines the effective revenue deficit; option (c) is closer to the fiscal deficit before non-debt capital receipts are netted out.