Question 1 · 302 words written
Opening · a definition
Fiscal deficit is the difference in the expenditure of the government and revenue collected.
Body · points
CAUSE OF FISCAL DEFICIT
i) promoting economic activity in the country. → promoting counter cyclic measure like 'Make in India'
ii) promotion of inclusivity through welfare schemes: → Food security & PDS → health - Atmanirbhar Bharat → education - eklavya
iii) increase in capital expenditure to 3.2% of GDP - 2024 (Budget) → crowding in effect → promote growth of other indus.
iii) Geopolitical tension causing rise in cost of fertiliser (80% importer)
iv) populist measure by some govern. Eg) Revadi culture
CONSEQUENCES
i) intergeneration pressure due to high borrow Eg) oil bonds
ii) decrease the intrest of private player [crowding out effect]
iii) higer intrest rate → leading to decrease demand
iv) inflation in economy
WAY FORWARD
i) application of pruden[ce] in accordance with [FRBM ACT] 2016
ii) promotion [PPP] infrastructure as [per] kelkar committee
iii) Output based budget
Fiscal consolidation is an essentia measure to maintain the economy health of nation
India @ 47 envisions to become Viksit Bharat that is made India largest economy and reduce inequality.
POTENTIAL OF CAPITAL INVESTMENT
- development of manufacturing
- current 18% GVA
- PLI scheme in 12 major s.
- Food Park, Pharma Park
- industrial hubs
i) Technological upgradation in → AI, ML → b) improve efficiency chip manufacturing
ii) reduce logistic cost from 14% of GDP to 8% of GDP → multimodal transportation system
iii) Improve employment opportuni[ties] → skills and reskilling → PM Kaushal Vikas Yojana
CHALLENGES
i) overdependence on the public expenditure → low private expenditure
ii) difficulty in getting land clearance
iii) challenge to arrange credit → supply [side]
Thus to achieve India vision @ 47 → one stop clearance centre for capital expenditure → gatishakti model of infrastructure
Close · a way forward
should be used.