AIR 46 · CSE 2024 · GS3 · 53 pages

Rahul Shekhar: GS3 answer copy

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

The questions

  1. QStudent Query

The answers

Question 1 · 10 marks · 189 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

Fiscal deficit in India is nearly 5.8% of GDP in FY23-24 and is much beyond the 3% target as per FRBM.

Body · points and prose

Diagram
- Factors - 1) low tax to GDP ratio - Bar chart showing Tax/GDP on y-axis, countries on x-axis: - India: 17% - China: 24% - OECD: 35% - 2) Populist measures - farm loan waivers, non-asset creating subsidies. - 3) Inefficient taxation machinery - leakages - lots of exemptions. - 4) Government thrust on capex through borrowing. - Eg: 11.1 trillion capex for FY24-25. - 5) off budget borrowings. - 6) inefficient PSEs
Diagram
Potential consequences - 1) High interest burden - largest component of expenditure in budget - 2) Burden on future generations - 3) Out-migration due to tax burden on narrow middle class - 4) High interest rates → Crowding out effect

Suggested measures -

  1. Simplify tax structure
  • less slabs, minimal exemptions.
  1. focus on disinvestment and asset monetisation targets.
  2. Widen tax base → Rich farmers.
  3. Political consensus for NO FREEBIES.
  4. Build strong financial sector to provide cheaper credit
  5. curb off budget borrowings through a law.

Fiscal stability is the key pillar of sustainable growth at high pace.

Food corporation of India procures, stores and delivers the food grains and is a vital link in India's food security system, but is marred with inefficiencies.

Role of FCI

Diagram
- Buy grains from markets (APMC mandis) (By FCI) -> Store in godowns (self as well as rented) (By FCI) - Store in godowns -> Transfer to States based on quota allocated (By FCI) - Transfer to States -> States then sell the grains to people as per NFSA, 2013 (By states)
Diagram
- Issues with FCI - 1) Transfer related inefficiencies - Leakages while transporting - No proper accounting - 2) Storage losses - Nearly 25 MMT per annum - Reduce shelf life - 3) Corruption - Selling outside - Record tampering - 4) Low technological usage - Data management issues - 5) Lack of standard warehousing practices

Desirable reforms in FCI -

  1. Use of GPS tracking systems to ensure no divergence while transit.
    • Work in progress.
  2. Focus on grading and sorting
    • Quality should be focussed
  3. Standard practises like Warehouse Management Systems (WMS) should be implemented.
  4. Blockchain integration
    • Immutable sale and purchase data.
  5. Storage efficiency enhancement
    • Cold chains
    • Proper disinfectant usage etc.

Close · a summary

Proper functioning of FCI will help us reduce our food subsidy bill substantially.