A topper · CSE 2024 · GS3 · 54 pages

Aditya Agarwal: GS3 answer copy

20 answers by Aditya Agarwal, as written in the test. Each question opens a page with how other toppers answered it.

The questions

The answers

Question 1 · 10 marks · 126 words written

Highlighting the factors contributing to high fiscal deficit in India, discuss the potential consequences of such deficit and suggest measures to ensure fiscal consolidation.

Opening · a definition

Fiscal deficit refers to the net borrowings taken by the government to finance its expenditure - revenue and capital.

Currently it is around 5.8% and the government aims to reduce it to 5.3% (Budget FY25).

Factors contributing to the high fiscal deficit

Body · points and prose

i) Low tax revenue collection by the government - direct and indirect tax.

ii) Low tax base - activities such as agriculture not included.

iii) High revenue expenditure of the government. (Eg) High pensions and salaries for defence.

iv) High capital expenditure - increased from 12% to 20% of total expenditure.

v) Subsidies - food, fuel and fertilisers along with expenditure in welfare schemes. (Eg. PM Awas Yojana).

Diagram
- Consequences of such deficit - Borrowing by the government to finance the deficit - crowding out of private sector (Economic survey) - High inflation due to monetising the deficit - High revenue expenditure → intergenerational equity issues - Burden to reduce expenditure on social welfare
Diagram
- Measures to be taken - Reduction in revenue expenditure (Eg. Agnipath scheme) - Increased capital expenditure → multiplier effect → increase tax income - Prevent leakages and corruption in Subsidies and schemes. (Eg. MGNREGA social audit) - Tech. usage to increase tax collection

Close · a summary

Government measures such as faceless tax appeals, GST, New Pension scheme are aimed at fiscal consolidation.