Question 1 · 10 marks · 174 words written
Opening · a figure
India's fiscal deficit stands at 5.4% of GDP against the target of 4.5% of GDP showing high deficit.
Body · points
Factors contributing:
obligations of Revenue expenditure. → Salaries, pensions, schemes
freebie culture → leading to high toll on exchequer. Eg: loan waivers by Telangana
High subsidy burden. → 2.5% of GDP → food, fertilizer and electricity
lack of investments in high output sectors → Manufacturing at 16% of GDP only.
Potential consequences :
low investments and Gross fixed capital formation
Job less growth → due to lack of skills
lowering the credit rating of government Eg: Indian G-sec is present in BBA category
Investors confidence will reduce ↳ FDI, FPI will be affected.
Infrastructure Creating compromised.
Measures for fiscal Consolidation :
→ 1) freebie culture to essential subsidies (eg) : E-vouchers for health
→ 2) private investments ↳ Budget 2024-25 highlights this.
→ 3) skillng of youth → PM Kaushal Vikas 4.0
Close · a source
Hence fiscal deficit should be glided to 4.5% GDP as recommended by "N.K. Singh panel".