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RAS question

What fiscal deficit target for the Centre by 2030-31 was recommended by the 16th Finance Commission?

Correct answer: (B) 3.5% of GDP.

The 16th Finance Commission recommended that the Centre bring its fiscal deficit down to 3.5% of GDP by 2030-31.

  1. (A)

    3.0% of GDP

  2. (B)

    3.5% of GDP

  3. (C)

    4.0% of GDP

  4. (D)

    4.5% of GDP

Explanation

The answer is 3.5% of GDP because the 16th Finance Commission's projection table for Union finances shows the Centre's fiscal deficit declining through the award period: 4.4% of nominal GDP in 2025-26, then 4.2%, 4.0%, 3.8%, 3.6%, and finally 3.5% in 2030-31. This target sits alongside a 3% of GSDP limit for States and reflects a more compliance-driven fiscal model. The key point for the MCQ is that the asked target is specifically for the Centre by 2030-31, not the States' fiscal limit and not an interim Union projection from an earlier year.

Why the other options are wrong

  • (A) 3.0% is the State-level GSDP limit, not the Centre's fiscal deficit target for 2030-31.
  • (C) 4.0% appears as an earlier Union fiscal deficit projection in the award-period table, but the 2030-31 entry is 3.5%.
  • (D) 4.5% is higher than the Commission's 2030-31 Union projection and is not the Centre's target in the award-period table.

Concept

This tests fiscal consolidation under Finance Commission recommendations. It recurs in RAS because Centre-State fiscal rules, deficit limits, and Finance Commission awards are core Indian Economy topics.

Source

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