AIR 13 · CSE 2025 · GS3 · 56 pages

Ananya: GS3 answer copy

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

The questions

The answers

Question 1 · 10 marks · 196 words written

Fiscal policy can be a key tool to reduce income inequality as well as make the poorest and the downtrodden a part of the country's growth story. Discuss in the context of India.

Opening · a figure

In India, 10% of the people own 78% of the wealth (Oxfam Report). This shows stark income inequality existing in India. To counter it, fiscal policy can be a key tool.

Body · points

Diagram
Fiscal Policy tool → decided by Govt. of India → Included taxes, subsidies, etc

Fiscal Policy → Reducing Inequality

  1. Tools like progressive taxation can help reduce the income inequality → Eg, in India, the income tax is progressive in nature.
  2. Reducing indirect taxes on necessary goods can reduce burden on poor → Eg, less tax on sugar, salt.
  3. Rationalisation of subsidies to poor → benefit to poor → less burden on govt.
  4. More revenue spending on indirect subsidies (to farmers) than direct (eg) more subsidy on inputs to farmer → promotes growth.
  5. Rationalisation of taxes on elderly.
  6. Reducing corporate tax (Present ≈ 22%) less tax → more investment → more employment → less inequality to people.

Issues with fiscal tool:

  1. Fiscal constraints of govt.
  2. High Fiscal Deficit (≈ 6.9% of GDP).
  3. Unsustainable steps → misuse of fiscal tools (eg) Farm loan waivers → add to fiscal burden.
  4. Often politicised.

Close · a way forward

Hence, way forward is rational usage of fiscal policy. The establishment of Independent Fiscal Council can be a positive step.