Question 1GS2GS2

Discuss the potential to high fiscal deficit in India. Discuss the factors contributing to high fiscal deficit in India, discussing the potential consequences of such deficit and suggest measures to ensure fiscal consolidation.

Introduction

India's fiscal deficit currently stands at 5.1% of GDP, far above the 3% target FRBM.

15 words

Main Body

Factors responsible: (1) Global uncertainties - COVID-19Russia-Ukraine WarIsrael-Hamas issueIncreased fiscal deficitsupply chain disruptionsIncreased oil & gas prices (2) Developmental & non-developmental expenditure - capex, infrastructure creation (3) High logistic cost (1.4% of GDP) for above world average. (4) Low exports (< 3% of world) & import dependency.

Potential consequences of high FD: (1) Crowding out of private sector (2) Lack of capex due to high FD. (3) Development & asset creation compromised. (4) Twin deficit problems - High FD & High Current Account Deficit (5) Increased government borrowing & degraded sovereign credit rating. Measures to improve FD: (1) Supporting manufacturing sector and increasing exports (2 billion target - Foreign Trade Policy 2023) (2) MSME-led growth (45% export, 30% GDP contribution) (3) Diversification of supply chains & reduced import dependency (Atmanirbhar Bharat) Curbing fiscal deficit within limit is pre-condition of goal of 30 billion economy by 2047 (Amrit Kaal).

158 words1 paragraphs

Conclusion

Capital investment is key to achieve vision of developed nation by 2047.

12 words

Open original scan

Page 4

Topper

Komal Punia

Subject & Paper

GS2GS2

Topic

Government Policies and Interventions - Design, Implementation and Issues

Government Schemes and Policies

Fiscal Policy and Deficit Management

Writing Stats

185

Total words

Paragraphs

analytical

Tone