2016 GS Paper I, all questions

UPSC Prelims 2016 · GS Paper I

Question 12: Economy and Social Development

Which of the following is/are included in the capital budget of the Government of India?

  1. 1.Expenditure on acquisition of assets like roads, buildings, machinery, etc.
  2. 2.Loans received from foreign governments
  3. 3.Loans and advances granted to the States and Union Territories

Select the correct answer using the code given below.

a1 only
b2 and 3 only
c1 and 3 only
d1, 2 and 3

AnswerUPSC’s answer is (d).

The capital budget records capital receipts and capital payments, items that change the government's assets or liabilities. Spending on roads, buildings and machinery creates assets, loans and advances to States and Union Territories are assets of the Centre, and loans from foreign governments are borrowings, which are capital receipts. All three belong in the capital budget. Day-to-day spending on salaries, interest and subsidies is revenue expenditure.

  • 1. Expenditure on acquiring assets is capital expenditure.
  • 2. Loans received from foreign governments are capital receipts, since they create liabilities.
  • 3. Loans and advances to States and UTs are capital expenditure creating assets for the Centre.

How you could have got this

  1. If you were sure statement 1 is correct, (b) goes: it leaves 1 out.

    What you needed to know: Expenditure on acquiring assets is capital expenditure.

  2. Then, if you were sure statement 2 is correct, (a) and (c) go: each of them leaves 2 out.

    What you needed to know: Loans received from foreign governments are capital receipts, since they create liabilities.

Only (d) is left. You didn’t need statement 3.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Asset-creating expenditure is included, but so are the other two items.
  • (b) Items 2 and 3 are included, but item 1 is also included.
  • (c) Items 1 and 3 are included, but foreign loans are also a capital receipt.
  • (d) Right: all three are capital budget items.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2016, General Studies Paper I, Series A. The paper on upsc.gov.in.