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UPSC 1996: The following Table shows the percentage distribution of revenue expenditure of Government of India in 1989-90 and 1994-95: (Heads: Defence, Interest Payments, Subsidies, Grants to States/UTs Other) Based on this table, it can be said that the Indian economy is in poor shape because the Central Government continues to be under pressure to
(a)reduce expenditure of defence
(b)spend more and more on interest payments
(c)reduce expenditure on subsidies
(d)spend more and more as grants-in-aid to State Governments/Union Territories
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Not attemptedCorrect Answer: (b) spend more and more on interest payments
Between 1989-90 and 1994-95, interest payments rose sharply from 27.7 % to 38.7 % of total revenue expenditure—the biggest jump among all heads—signalling mounting debt-servicing pressure on the Union budget. Hence the economy’s poor shape is chiefly due to the compulsion to "spend more and more on interest payments" (option b). Defence and subsidies actually fell in relative share, while grants to states rose only marginally. ([licchavilyceum.com](https://licchavilyceum.com/upsc-civil-services-prelims-1996-solved-question-paper/))
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Frequently Asked Questions
What is the correct answer to this UPSC 1996 Indian Economy question?▼
The correct answer is option (b): spend more and more on interest payments. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Fiscal Policy & Budget question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 1996, GS Paper 1, as Question 21. It falls under Indian Economy > Fiscal Policy & Budget.
What is the difficulty level of this UPSC question?▼
This question is rated "moderate". It requires sound conceptual understanding of the topic.
How many UPSC Prelims questions have been asked from Fiscal Policy & Budget?▼
UPSC has asked 44 questions from Fiscal Policy & Budget (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.