UPSC Prelims 1996·GS1·economy·public finance

The following Table shows the percentage distribution of revenue expenditure of Government of India in 1989-90 and 1994-95: | Years | Defence | Interest | Subsidies | Grants to | | :--- | :--- | :--- | :--- | :--- | | 1989-90 | 15.1 | 27.7 | 16.3 | 13.6 27.4 | | 1994-95 | 13.6 | 38.7 | 8.0 | 16.7 23.0 | Based on this table, it can be said that the Indian economy is in poor shape because the Central Government continues to be under pressure to [Years | Defence | Interest | Subsidies | Grants to ; | | Payments | | States/Us Other ; 1989-90 | 15.1 | 27.7 | 16.3 | 13.6 27.4 ; 1994-95 | 13.6 | 38.7 | 8.0 | 16.7 23.0]

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  1. Areduce expenditure of defence
  2. Bspend more and more on interest paymentsCorrect
  3. Creduce expenditure on subsidies
  4. Dspend more and more as grants-in-aid to State Governments/Union Territories

Explanation

The correct answer is B because the table shows a significant and sharp increase in the percentage of revenue expenditure allocated to interest payments. In 1989-90, interest payments accounted for 27.7 percent of the expenditure, but by 1994-95, this figure rose to 38.7 percent. This indicates that a large and growing portion of the governments revenue is being consumed by debt servicing rather than being used for productive investments or developmental activities. In the context of the Indian economy during that period, this rising debt burden was a primary indicator of fiscal strain and poor economic health. While other expenditures like subsidies and defence decreased or showed smaller changes, the massive jump in interest payments represents the most critical pressure point on the budget.
economy: The following Table shows the percentage distribution of revenue expenditure of Government of India in 1989-90 and 1994-
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