Central Government Finances in 2020-21

The central government’s finances in 2020-21 were significantly impacted by the COVID-19 pandemic. The government had to incur large expenditure on measures to contain the pandemic and support the economy, leading to a significant fiscal deficit.

The total revenue of the central government in 2020-21 was Rs. 22,45,893 crore, while the total expenditure was Rs. 30,42,230 crore. This resulted in a fiscal deficit of Rs. 7,96,337 crore, which was 9.5% of the GDP.

The fiscal deficit was financed through a combination of borrowings and other means. The net market borrowings of the central government in 2020-21 were Rs. 5,36,145 crore.

The central government’s debt-to-GDP ratio in 2020-21 stood at 90.5%, which was an increase of 3.5 percentage points from the previous year.

MCQs

Here are some MCQs on the topic:

  1. What is the fiscal deficit?
    • The difference between the government’s revenue and expenditure.
    • The difference between the government’s borrowings and expenditure.
    • The difference between the government’s revenue and borrowings.
    • The difference between the government’s expenditure and debt.
  2. What is the debt-to-GDP ratio?
    • The ratio of the government’s debt to the GDP.
    • The ratio of the government’s revenue to the GDP.
    • The ratio of the government’s expenditure to the GDP.
    • The ratio of the government’s borrowings to the GDP.
  3. What is the main reason for the fiscal deficit in 2020-21?
    • The COVID-19 pandemic
    • The increase in government spending
    • The decrease in government revenue
    • All of the above
  4. What are the implications of the high fiscal deficit and debt-to-GDP ratio?
    • The government may have to raise taxes in the future.
    • The government may have to borrow more money in the future.
    • The government may have to cut spending in the future.
    • All of the above
  5. What are the measures that the government can take to reduce the fiscal deficit and debt-to-GDP ratio?
    • Increase revenue
    • Reduce expenditure
    • Borrow less money
    • All of the above

The answers are as follows:

  1. (a)
  2. (a)
  3. (d)
  4. (d)
  5. (d)