EPFO APFC 2023 General Studies · Question 58 of 120

Correct — C, (c) Both 1 and 2. Each statement reproduces one half of the way the Department of Economic Affairs describes itself, and both are accurate. Statement 1 is correct. The Department of Economic Affairs is the nodal department of the Union Government for economic policy. It prepares and monitors the policies and programmes that bear on the management of the economy, and its reach is deliberately described as covering both the domestic and the international side, because the same department handles the Budget and the capital markets at home and India's dealings with the World Bank, the International Monetary Fund, the Asian Development Bank and the G20 abroad. The Economic Division within it, working under the Chief Economic Adviser, produces the Economic Survey that is laid before Parliament ahead of the Budget. Nodal is the operative word: other bodies advise on the economy — NITI Aayog is a policy think tank, the Reserve Bank is the monetary authority — but the department that formulates and monitors the Government's economic policy is this one. Statement 2 is correct as well. The Budget Division of the Department prepares the Union Budget and it is presented to Parliament as the Annual Financial Statement required by Article 112. The same Division also prepares the budgets of the Union Territories that have no legislature of their own, and the budget of any State placed under President's Rule, because in that situation the State's finances are voted by Parliament rather than by the State legislature. The words that make a well-prepared candidate hesitate are including the Railway Budget, since the separate Railway Budget ceased to be presented after the merger with the Union Budget, the first combined Budget being presented on 1 February 2017 following the recommendation of the committee headed by Bibek Debroy. But the merger supports the statement rather than contradicting it. Before the merger the railway numbers were prepared and presented separately by the Ministry of Railways; since the merger they form part of the Union Budget that this Department prepares and lays before Parliament. So the Budget the Department presents does include the railway component, and the statement stands.

• (a)1 only — This accepts the description of the Department's mandate and rejects the description of its budget responsibility, and the reason is almost always the parenthesis about the Railway Budget. The reasoning behind the rejection is sound as far as it goes — a separate Railway Budget is indeed no longer presented, the practice having ended with the merger that took effect from the Budget for 2017-18 — but the conclusion drawn from it is wrong. The railway estimates did not disappear; they were folded into the Union Budget, which is prepared by the Budget Division of this Department and presented to Parliament as a single document. A statement that the Department prepares and presents the Union Budget including the Railway Budget therefore describes the position after the merger accurately, and it would have been more open to challenge before it.
• (b)2 only — This accepts the budget function and denies that the Department is the nodal agency for economic policy. Candidates reach it by attributing that role elsewhere — to NITI Aayog, because it is the visible policy body; to the Prime Minister's Office or the Cabinet, because major decisions are announced there; or to the Reserve Bank of India, because it manages monetary policy and the currency. None of those is the nodal department for the Government's economic policies and programmes. NITI Aayog is an advisory and planning institution without executive responsibility for policy, the Reserve Bank is the monetary authority and the regulator of the banking system rather than an arm of the Government's policy machinery, and the Cabinet decides rather than formulates and monitors. The department that does the work described is the Department of Economic Affairs.
• (d)Neither 1 nor 2 — This rejects both descriptions and leaves the Union Budget with no author and the Government's economic policy with no nodal department, neither of which is tenable. The option is a candidate's refuge when a statement set contains one sentence he cannot verify and another that contains an unexpected detail — the sensible response there is to test each statement independently rather than to discard the pair. Read separately, the first statement is the Department's standing description of its mandate and the second is a plain account of what its Budget Division does, extending beyond the Union Budget to the Union Territories without legislatures and to States under President's Rule.

The Ministry of Finance works through separate departments, of which the Department of Economic Affairs is the one that deals with the economy as a whole rather than with a slice of the Government's finances; the others are Expenditure, Revenue, Financial Services, Investment and Public Asset Management, and Public Enterprises. The Department of Economic Affairs is the nodal agency for formulating and monitoring the Government's economic policies and programmes, and its work spans the domestic and the external economy. Domestically, its Budget Division prepares the Union Budget, which is presented to Parliament as the Annual Financial Statement required by Article 112, together with the budgets of Union Territories without legislatures and of any State under President's Rule; its Economic Division, headed by the Chief Economic Adviser, prepares the Economic Survey; and it deals with capital markets policy, infrastructure financing, currency and coinage, and the administration of the foreign exchange law. Externally, it is the department that handles India's relations with the multilateral financial institutions — the World Bank, the International Monetary Fund, the Asian Development Bank and the newer development banks — as well as bilateral development co-operation and the G20 finance track. The Budget itself sits on a constitutional frame that the candidate should know alongside the administrative one: Article 112 requires the Annual Financial Statement, Article 266 establishes the Consolidated Fund and the Public Account and Article 267 the Contingency Fund, Article 114 requires an appropriation law before money is withdrawn from the Consolidated Fund, and Article 265 forbids any tax except by authority of law. The separate Railway Budget, a practice begun in the 1920s on the recommendation of the Acworth Committee, was merged into the Union Budget from 2017-18, and railway finances have since been presented as part of the single document this Department prepares.

Governance items in this paper name a body and ask what it does, and the Commission frequently lifts the wording of the statements from the organisation's own published description of its mandate. That has a practical consequence for preparation: the most reliable revision for this family is the official statement of functions of the main economic ministries and regulators, read once with attention to which body is described as nodal for what. It also produces the particular difficulty of this item. A statement copied from an official description may contain a phrase that has been overtaken by a change in practice, and a candidate who is more current than the phrase may reject a statement that is nevertheless correct. The right test is whether the sentence accurately describes what the body does, not whether every clause in it reflects the latest reorganisation. Note the printed form here: the item opens with the words Consider the following statements followed by a colon with a space before it, and it closes with the question about which statements are correct without any separate instruction to select the answer from a code, unlike most of the statement items in this paper.

• The Department of Economic Affairs is the nodal department of the Union Government for formulating and monitoring economic policies and programmes with domestic and international bearing.
• Its Budget Division prepares the Union Budget, presented to Parliament as the Annual Financial Statement under Article 112, along with the budgets of Union Territories without legislatures and of States under President's Rule.
• Its Economic Division, under the Chief Economic Adviser, prepares the Economic Survey laid before Parliament ahead of the Budget.
• It is the department responsible for India's engagement with the World Bank, the International Monetary Fund, the Asian Development Bank and the G20 finance track, and for currency and coinage and foreign exchange management.
• The separate Railway Budget was merged with the Union Budget from 2017-18, the first combined Budget being presented on 1 February 2017 on the recommendation of the committee headed by Bibek Debroy; railway finances now form part of the Union Budget.
• The Ministry of Finance's other departments are Expenditure, Revenue, Financial Services, Investment and Public Asset Management, and Public Enterprises.
• NITI Aayog is an advisory and planning body and the Reserve Bank of India is the monetary authority; neither is the nodal department for the Government's economic policy.

• Rejecting a statement because one clause in it sounds dated; the parenthesis about the Railway Budget describes the position accurately after the merger folded railway finances into the Union Budget
• Attributing the nodal economic policy role to NITI Aayog, the Reserve Bank or the Cabinet
• Confusing the Department of Economic Affairs with the Department of Expenditure, which deals with the spending of ministries, or with the Department of Revenue, which deals with taxation
• Forgetting that the Department also prepares the budgets of Union Territories without legislatures and of States under President's Rule
• Choosing the option that rejects both statements when only one clause is doubtful; each statement has to be tested on its own

Governance items in this paper give two or three statements about a named institution and ask which are correct, with the code printed as one only, two only, both, or neither. The statements are usually drawn from official descriptions of the body's mandate, so the discriminating knowledge is institutional rather than analytical. Expect one statement to carry a detail that has been overtaken by a reorganisation, and test whether the sentence still describes what the body does before rejecting it.

No directly related past PYQ was found.

• practice — not a real PYQ

  The Union Budget is presented to Parliament as which one of the following constitutional documents?

  • (a)The Appropriation Bill under Article 114
  • (b)The Annual Financial Statement under Article 112
  • (c)The Finance Bill under Article 110
  • (d)The Demands for Grants under Article 113

  Answer(b) The Annual Financial Statement under Article 112 — that is the Constitution's own name for the Budget, a statement of the estimated receipts and expenditure of the Government for the year. The demands for grants, the Appropriation Bill and the Finance Bill are the later stages by which Parliament sanctions the expenditure and the taxation the statement proposes.

• practice — not a real PYQ

  The Economic Survey of India is prepared by

  • (a)NITI Aayog
  • (b)the Reserve Bank of India
  • (c)the Economic Division of the Department of Economic Affairs
  • (d)the Comptroller and Auditor General of India

  Answer(c) the Economic Division of the Department of Economic Affairs — it is prepared under the guidance of the Chief Economic Adviser and laid before Parliament, ordinarily a day before the Budget. NITI Aayog produces its own reports, the Reserve Bank publishes monetary and financial reports, and the Comptroller and Auditor General audits accounts after the event.