AIR 40 · CSE 2025 · GS3 · 58 pages

Diksha Rai: GS3 answer copy

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

The questions

The answers

Question 1 · 10 marks · 182 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 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

  1. Economic 1.1. High inflation 1.2. Increased cost of borrowing 1.3. Unemployment and subsequent Fiscal support

  2. Political 2.1. Freebies eg: free electricity. 2.2. Debt waivers eg- farm loan waiver. 2.3. Subsidies eg- power subsidies.

  3. 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

  4. Geo-political 4.1) Middle East Tensions → ↑ Crude oil prices 4.2) Russia Ukraine war → ↑ Food inflation.

  5. Sudden Shocks such as COVID-19 pandemic required Govt interventions & fiscal support.

Diagram
Consequences of High Fiscal Deficit: - ↑ Inflation - ↑ Interest rates - Crowding out of private sector - Intergenerational Burden - Decrease in private capital formation and investment - Current Account Deficit - Fiscal Instability

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.