Highlighting the factors contributing to high fiscal deficit in India, discuss the potential consequences of such deficit and suggest measures to ensure fiscal consolidation. (10 marks, 150 words)
Introduction
Fiscal deficit refers to the net borrowings taken by the government to finance its expenditure - revenue and capital. Currently it is around 5.8%, and the government aims to reduce it to 5.3% (Budget FY25).
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Main Body
Factors contributing to the high fiscal deficit:
i) Low tax revenue collection by the government - direct and indirect tax.
ii) Low tax base - activities such as agriculture not included
iii) High revenue expenditure of the government
(a) High pensions and salaries for officers.
iv) High capital expenditure - increased from 1.4% to 2.0% of total expenditure
v) Subsidies - food, fuel and fertilizers along with expenditure in welfare schemes. (eg PM Awas Yojana.
Consequences of such deficit:
Measures to be taken:
Conclusion
Government measures such as faceless-tax appeals, GST, New Pension Scheme are aimed at fiscal consolidation.
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Diagram
Mind map showing 'Factors contributing to the high fiscal deficit' with branches connecting to various causes listed
- Clear definition of fiscal deficit provided at the beginning
- Comprehensive enumeration of factors contributing to high fiscal deficit
- Specific data provided (5.8% current, 5.3% target for FY25)
- Organized structure with numbered points
- Includes both direct and indirect causes
- Mentions specific schemes (PM Awas Yojana)
Aditya Agarwal
Indian Economy
Fiscal Policy and Deficit
Fiscal Deficit in India - Causes, Consequences, and Solutions
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Total words
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Paragraphs
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Bullets