CAPF AC 2025 Q17: Indian Economy – Fiscal Policy & Budget
- (a) Centrally sponsored schemes
- (b) Pensions
- (c) Interest payments
- (d) Defence
Answer: (c) Interest payments
Explanation
Biggest item in Budget 2025-26
How to think: a government that has borrowed for decades must pay interest every year, and that bill is larger than any single scheme.
In the Union Budget the interest payments line is the largest of all expenditure heads.
| Item | Position in Budget 2025-26 |
|---|---|
| Interest payments | Highest, about a quarter of total expenditure (about ₹12.8 lakh crore) |
| Defence | Second-largest single item, about ₹4.9 lakh crore |
| Pensions | Smaller than defence |
| Centrally sponsored schemes | Many schemes added up, but each head is smaller |
Interest takes roughly 37 paise of every rupee of revenue receipts, which leaves less for development.
Answer: (c) Interest payments.
Why each option is right or wrong
- (a) Incorrect. Centrally sponsored schemes are smaller than the interest bill.
- (b) Incorrect. Pensions are well below interest payments.
- (c) CORRECT. Interest payments received the highest allocation.
- (d) Incorrect. Defence is large but still second to interest payments.
Key point
Union Budget 2025-26: biggest expenditure head is interest payments (about 25% of total spending, about 37% of revenue receipts); defence is next. Fiscal deficit target 4.4% of GDP.
Remember
Interest payments top the budget; defence is second.
Common mistakes
- Picking defence because it is the biggest ministry allocation.
- Forgetting that interest is a committed expenditure on past borrowing.
- Adding up all schemes together instead of comparing single heads.
Exam tip
Educated guess: in India's budget, 'where does the money go?' has had the same answer for years: interest payments first, then defence.
Sources
- Union Budget 2025-26, Budget at a Glance (Ministry of Finance, 1 February 2025)
- PIB, Union Budget 2025-26 highlights: expenditure profile