Topic Details (Notes format)

Public Finance and Government Debt

Subject: Economics

Book: Comprehensive Indian Economy

Public finance studies government revenue, expenditure, and debt management. The center and states raise funds via taxes, market borrowings, and external loans. Debt sustainability rests on prudent fiscal consolidation—if deficits are high over time, interest payments can crowd out development expenditure. Key metrics include debt-to-GDP ratio and interest coverage. The FRBM Act imposes rules to keep deficits within targets. In exam contexts, be ready to assess how large debt affects inflation, currency stability, and growth. Also highlight the role of zero-based budgeting or outcome budgeting to ensure efficient resource allocation.

Practice Questions

Which of the following is an example of a public sector undertaking (PSU) in India?

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Which of the following measures is most effective in controlling inflation?

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What is the term for goods that are used together, such as cars and fuel?

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What is the term for the price at which demand and supply in a market are equal?

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Which of the following is a direct tax?

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Which of the following is an example of a non-renewable resource?

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Which of the following is a characteristic of “perfect competition”?

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Which of the following measures can reduce a trade deficit?

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What is the Phillips Curve?

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What is “inflation targeting”?

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