Question 1 · 10 marks · 182 words written
Opening · a figure
The Fiscal Deficit of India in the financial year 2023-24 was 5.8% of GDP.
Fiscal Deficit refers to the balance of Govt Expenditure and Receipts (sans borrowing).
Body · points and prose
Factors contributing to high Fiscal Deficit
Economic 1.1. High inflation 1.2. Increased cost of borrowing 1.3. Unemployment and subsequent Fiscal support
Political 2.1. Freebies eg: free electricity. 2.2. Debt waivers eg- farm loan waiver. 2.3. Subsidies eg- power subsidies.
Structural 3.1. Poverty and deprivation → govt support 3.2. Increase in capital Expenditure 3.3. Pension and Salary burden for Govt Servants 3.4. Import dependency for oil seeds etc
Geo-political 4.1) Middle East Tensions → ↑ Crude oil prices 4.2) Russia Ukraine war → ↑ Food inflation.
Sudden Shocks such as COVID-19 pandemic required Govt interventions & fiscal support.
Measures for fiscal consolidation → Adhering to path laid out in FRBM Act → Achieving target of 4.5% Fiscal Deficit by 2025-26 → Optimising revenue expenditure → Rationalising subsidies → Increasing tax net and buoyancy.
Close · a way forward
Fiscal Consolidation & Fiscal Prudence requires a whole of govt approach in enhancing receipts and minimising wasteful expenditure.