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Refer to the given… (Class 12 Economics SQP 2025-26, Q17)

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EconomicsCBSE Class 12 · Sample paper, session 2025-26 · 6 marks · Case-based

CBSE Class 12 Economics sample paper 2025-26: question 17

From the official CBSE sample question paper for 2025-26, section A, question 17, for 6 marks. Try it first; the hints and our step-by-step solution are below.

Q17 · 6 marks · Case-basedCompetency-basedGovernment Budget and the Economy

Refer to the given text carefully:
Revenue receipts of the Union Government of India, consisting of tax revenue and non-tax revenue increased year-on-year by 14.5% in the financial year 2023-24, with robust growth in both tax and non-tax revenues.
In spite of the global trend of widening fiscal deficit and increasing debt burden, India has remained on the course of fiscal consolidation. In the post-covid period, significant fiscal consolidation could be achieved largely due to buoyant government revenues. The favourable fiscal performance in the financial year 2022-23, emerged as the cornerstone of India’s macroeconomic stability.
The fiscal deficit of the Union Government has been brought down from 6.4% of Gross Domestic Product (GDP) in the financial year 2022-23 to 5.6% of GDP in the financial year 2023-24, according to the data released by the Office of Controller General of Accounts (CGA).
Strong growth in direct and indirect taxes on account of resilient economic activities and increased compliance meant that the tax revenues generated exceeded the budgetary estimates.
Additionally, higher-than-budgeted non-tax revenue in the form of dividends from the Reserve Bank of India (RBI) has buffeted revenue receipts. In combination with restrained revenue expenditure, these buoyant revenues ensured lower deficits.
A decomposition of the fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share of the fiscal deficit is being accounted for by capital outlay. This suggests that the productivity of borrowed resources has improved.
Source: Economic Survey 2023-24
On the basis of the given text and common understanding, answer the following questions:

  1. (I)

    Differentiate between the two types of revenue receipts as indicated in the above text.

    3 marks
  2. (II)

    Elaborate the reasons behind reduction in fiscal deficit of India for the financial year 2023-24.

    3 marks

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2025-26.

Hints

Open one hint at a time and try again before the next.

Hint 1

Revenue receipts neither create a liability nor reduce assets.

Hint 2

Fiscal deficit = total expenditure − (revenue receipts + non-debt capital receipts).

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. (I) Tax revenue is what the government receives through taxes, compulsory payments imposed on individuals, companies and other entities (direct taxes like income tax and indirect taxes like GST).

    1½ marks

  2. (I) Non-tax revenue is revenue from sources other than taxes, mainly interest, dividends and profits (such as the RBI's dividend), and fees.

    1½ marks

  3. (II) The fiscal deficit fell from 6.4% to 5.6% of GDP because: (a) direct and indirect tax collections grew strongly, helped by resilient economic activity and better tax compliance, so they exceeded the budget estimates; (b) non-tax revenue, especially the dividend from the RBI, was higher than budgeted; and (c) revenue expenditure was kept under control. Higher receipts with restrained spending meant less borrowing.

    3 marks

Answer: (I) Tax revenue comes from compulsory taxes; non-tax revenue from interest, dividends, fees etc. (II) Strong tax growth, higher RBI dividend and restrained revenue spending cut the fiscal deficit.

Where the marks are

  • Tax and non-tax revenue distinguished (1½ + 1½)
  • Reasons for the lower fiscal deficit (3)

Revise the chapter

Practise this chapterBoard-style questions from Government Budget and the Economy, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2025-26: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.