UPSC Prelims 2018 · Question 9 of 99
UPSC Prelims 2018 question on FRBM Review Committee Debt GDP Targets
- ExamUPSC CSE
- Year2018
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicPublic Finance
- DifficultyHard
- TypeStatement
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 Government 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?
Show answer
Answer: C. 1 and 3 only
Verdict
Statements 1 and 3 are correct, so the answer is (c) 1 and 3 only.
Statement by statement
Statement 1 is CORRECT. The FRBM Review Committee chaired by N. K. Singh, reporting in January 2017, recommended a debt to GDP ratio of 60 percent for the general government, split 40 percent for the Centre and 20 percent for the States, to be reached by 2023.
Statement 2 is INCORRECT because the magnitudes are reversed. The Centre's domestic liabilities stood at 46.1 percent of GDP in 2016-17, while the States' liabilities were 23.2 percent at end March 2016.
Statement 3 is CORRECT. Under Article 293(3), so long as a State has outstanding borrowings from the Centre, it must obtain the Centre's prior approval before incurring further debt.
Source
PRS India summary of the FRBM Review Committee Report.
How to crack it
Statement 2 is beatable without recall. Statement 1 allots the Centre twice the debt space of the States, which only makes sense if the Centre carries the larger debt, so statement 2's reversed ordering contradicts it. Read statements against one another rather than each against memory.