Q9 · UPSC Prelims 2018 · Set A · Polity and Governance

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Consider the following statements:1.The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.2.The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.3.As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter.Which of the statements given above is/are correct?

A 1 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3

Correct answer: (c) 1 and 3 only

Explanation

  1. A

    1 only

    (a) 1 only. The NK Singh FRBM Review Committee did recommend a 60 percent general-government debt–GDP ratio by 2023, split 40 percent Centre and 20 percent States. Statement 3 is also correct under Article 293(3), so stopping at 1 only is incomplete and not the key.

  2. B

    2 and 3 only

    (b) 2 and 3 only. Statement 3 is right, but statement 2 reverses the facts: the Centre’s domestic liabilities as a share of GDP are much higher than those of the States, not 21 percent versus 49 percent. A wrong debt comparison keeps this code off the key.

  3. C

    1 and 3 only

    (c) 1 and 3 only. (c) Official key: The FRBM review’s 60–40–20 debt path is correctly stated, and a State indebted to the Centre needs the Centre’s consent to raise a further loan. Statement 2’s 21 percent / 49 percent swap is false, so 1 and 3 only is the stored key.

  4. D

    1, 2 and 3

    (d) 1, 2 and 3. Statement 2 is false, so the all-correct code is not the key.

Summary. Official key is (c) 1 and 3 only. The FRBM Review Committee targeted 60 percent combined debt to GDP by 2023 (40 percent Centre, 20 percent States). Article 293 requires Central consent when a State already owes the Centre. The claim that States hold 49 percent domestic liabilities against the Centre’s 21 percent is inverted. Honour the stored letter (c).

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