Q.Bring out two ways of converting government companies into private companies.
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🔒 Start your 14-day free trial to unlock the full solution →Concept understanding — Government Budget Receipts (Revenue and Capital Receipts)
Two Kinds of Money the Government Takes In
Every rupee that flows into the government's account is a budget receipt — but not all rupees are alike. Some are ordinary income the government earns and keeps free of strings; others come with a future obligation attached, like a loan it must repay. Sorting receipts by that difference is the whole point of the revenue-versus-capital classification.
Revenue receipts = receipts that neither create a liability nor reduce any asset of the government.
Capital receipts = receipts that either create a liability or reduce an asset of the government.
Revenue Receipts — Regular, No Strings
Revenue receipts are the government's normal, recurring income. They split into two:
- Tax revenue — direct taxes (income tax, corporate tax) and indirect taxes (GST, customs).
- Non-tax revenue — interest, dividends and profits from public enterprises, fees, fines, and grants received.
The defining test: no new debt is created, and nothing the government owns is sold off.
Capital Receipts — Debt or Sold Assets
Capital receipts arrive when the government borrows or sells/reduces assets:
- Creating a liability — borrowings from the public, RBI, or abroad; these must be repaid.
- Reducing an asset — disinvestment (selling shares of public sector undertakings) and recovery of loans previously given.
So a loan taken is a capital receipt (liability created), while the interest the government earns on loans it gave is a revenue receipt.
The Simple Decision Rule
For any receipt, ask two questions:
Liability created?ORAsset reduced?
- If yes to either → capital receipt.
- If no to both → revenue receipt. …
Government companies can be converted to private ones through disinvestment of equity or an outright strategic sale with transfer of management control.
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Disinvestment of equity, and strategic sale (equity + management control).
Two ways of converting government companies into private companies:
- Disinvestment — the government sells off part or all of its shareholding/equity in a Public Sector Undertaking (PSU) to private investors, financial institutions, or the public through the stock market. …
- CBSE 2026Set ANNUAL1 markQ.Write the answer in one sentence: What is balanced budget?
›Reveal solutionSolution
Balanced budget: estimated receipts = estimated expenditure (no surplus or deficit).
A balanced budget is one in which the government's estimated receipts are exactly equal to its estimated expenditure for the financial year. There is neither a budget surplus (receipts greater than expenditure) nor a budget deficit (expendit …
- CBSE 2024Set ANNUAL1 markMCQQ.In response to the economic crisis, the Government of India introduced a "New Economic Policy", _______.(a) (A) In April, 1991(b) (B) In May, 1991(c) (C) In June, 1991(d) (D) In July, 1991(a) (A) In April, 1991(b) (B) In May, 1991(c) (C) In June, 1991(d) (D) In July, 1991
›Reveal solutionSolution
The New Economic Policy was announced in July 1991.
Facing a severe balance-of-payments and fiscal crisis in 1991, the Government of India (under Finance Minister Dr. Manmohan Singh) announced the New Economic Policy (NEP) in July 1991, launching the era of Liberalisation, Privatisation and Globalisation (L …
- CBSE 2024Set ANNUAL1 markQ.State the major steps taken by the Government of India towards liberalization under the reforms period.
›Reveal solutionSolution
Industrial delicensing + reduced PSU reservation + disinvestment.
Under the reforms begun in 1991, the Government of India took several steps towards liberalisation: it abolished industrial licensing for all but a handful of industries, reduced the number of industries reserved exclusively for the public sector (from 17 to a very small list), permitted automatic approval for foreign technology agreements and foreign investment in many industries, and began disinvestment of its equity in public sector undertakings to raise resources and improve efficienc …
- CBSE 2023Set ANNUAL1 markMCQQ.Non-tax revenue is -(a) Income tax(b) Corporate tax(c) Dividend(d) Debt (borrowings)
›Reveal solutionSolution
Non-tax revenue is the Dividend — option (c).
Non-tax revenue consists of revenue receipts of the government that do not arise from taxes — for example, dividends and profits from public-sector undertakings, interest receipts, fees, fines and external grants. Income tax (a) and corporate tax (b) are tax revenue, while debt …
- CBSE 2022Set ANNUAL1 markQ.Fill in the blank: Amount of income and expenditure is ______ in Balance budget.
›Reveal solutionSolution
In a balanced budget, estimated income and expenditure are equal.
A balanced budget is a budget in which the government's estimated receipts (revenue) are exactly equal to its estimated expenditure for the financial year. There is neither a surplus nor a defi …
- CBSE 2022Set ANNUAL1 markMCQQ.A Government Budget is –(a) a statement of revenue and expenditure of the Government for a year.(b) a statement of Tax Revenue.(c) a statement of Non-Tax Revenue.(d) a statement of residual of Revenue and Expenditure.(a) a statement of revenue and expenditure of the Government for a year.(b) a statement of Tax Revenue.(c) a statement of Non-Tax Revenue.(d) a statement of residual of Revenue and Expenditure.
›Reveal solutionSolution
Correct option: (A) a statement of revenue and expenditure of the Government for a year.
A Government Budget is an annual financial statement showing the government's estimated receipts (revenue receipts and capital receipts, including tax and non-tax revenue) and estimated expenditure for a financial year (1 April to 31 March in India). Option (B) and (C) each describe only one component of revenue, not the whole budget, and option (D) describes only the fiscal balance (deficit/surplus), …
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