Which of the following statements regarding the Indian fiscal framework and public budgeting is/are correct? 1. Under the FRBM Act, the government is mandated to lay a Medium-Term Fiscal Policy Statement and a Fiscal Policy Strategy Statement before Parliament. 2. The FRBM Review Committee (N.K. Singh Committee) recommended a Debt-to-GDP ratio target of 40% for the Centre and 20% for the States. 3. According to Musgrave's three-branch framework of public finance, the distribution function includes public expenditure on social services like education and health to improve human capital.

The Indian economy is facing 'Stagflation' where growth is slow, but inflation is high due to supply-side bottlenecks. The government wants to use the Union Budget to revive growth without fueling further inflation. They decide to reduce the corporate tax for new manufacturing units but simultaneously increase the capital gains tax on short-term equity investments. On the expenditure side, they cut non-productive subsidies but double the allocation for 'Digital Infrastructure' and 'Skill India'. Evaluate the likely impact of this 'Fiscal Mix' on the 'Potential GDP' and the 'Tax-to-GDP Ratio' of the country over the medium term. How would this shift affect the 'Quality of the Deficit'?

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 aims to: (1) Institutionalize fiscal discipline (2) Improve macro-economic management of public funds (3) Strengthen fiscal prudence (4) Innovate proportional taxation Select the correct answer using the codes given below: