Question 1 · 10 marks · 149 words written
Opening · a definition
Fiscal Policy refers to policy in respect to matters of Expenditure and Income of state which has quite an impact on economic growth of the country.
Body · points
Current Fiscal Policy Regime → Low capital expenditure (only around 13% of GDP); → high amount of non-merit expenditure e.g. freebies → taxation regime being inefficient (7 in 100 are taxpayers)
Key tool to Reduce inequality
Increase focus on capital expenditure; (Counter cyclical fiscal policy as suggested by Economic survey)
Reducing Revenue expenditure
- rationalisation of subsidies
- reducing freebies
- Infrastructure creation e.g. Roads, Public Projects e.g. National Infrastructure Pipeline As per World Bank, 1% creation (spending on) of infrastructure leads to increase in employment by 1%.
- Rationalisation of tax regime
- increase coverage of TDS
Close · a framework
(15th Finance Commission) So, Fiscal Policy based on the aforesaid parameters can contribute heavily towards achieving SDG 1 (Poverty) and SDG 10 (Inequality).