Question 2GS3GS3
The Reserve Bank of India's surplus transfers offer the government much-needed fiscal space, yet they are not without challenges. Critically examine the implications of the RBI's surplus transfers to the government. (Answer in 150 words)
Main Body
RBI transfers surplus income to govt. 2024 RBI provided record high transfer. Positive implications (1) Access to funds for govt to invest in infrastructure EG Capex = 3.4% of GDP (increased ISDA over 5 years) (2) Enables fiscal consolidation by govt EG Fiscal: 9.4.14.1.1, deficit 20102024 (3) Reduces govt reliance on debt & reduces interest payments (20.1% budgetary expenditure) (4) Enables expansion of social services expenditure EG (5.1. CAGR over last 5 years Negative implications (1) May cause wasteful spending by govt (Heller committee) EG Subsidies = 6% of govt expenditure (2) May create reliance on future transfers (3) Leads to freebies & wasteful elected promises (4) Not a stable source of incomemay fluctuate (5) May lead to fiscal indiscipline While useful, govt should avoid wasteful spending promoting fiscal prudence as per FRBM Act 2003
141 words1 paragraphs
Conclusion
While useful, govt should avoid wasteful spending promoting fiscal prudence as per FRBM Act 2003
15 words
Topper
Aryan Yadav
AIR 312025
Subject & Paper
GS3GS3
Topic
Economic Development
Government Budgeting
RBI Surplus Transfers and Fiscal Implications
Writing Stats
156
Total words
1
Paragraphs
critical and analytical
Tone