Question Q-1GS3GS3
The Union Budget 2025-26 outlines a shift towards the 'debt-to-GDP ratio' as the fiscal anchor for fiscal consolidation starting from FY 2026-27. Discuss the rationale behind this shift.
Introduction
FRBM Act 2003 outlines fiscal health measurement indicators
8 words
Main Body
FRBM Act 2003 outlines 4 indicators for fiscal health measurement, two of which are Fiscal Deficit FD and Debt-to-GDP (D2G). 2025 budget announced shift from FD to D2G. Rationale behind the shift: (1) Limited flexibility in Fiscal Deficit FrameworkOnly budgetary loss ↓ Reduced scope for financial innovation or sectoral adjustment ↓ Deficit in one sector lost in supplemented in another (2) Narrow scope of FD ↓ Balance sheet emphasis doesn't effectively account for extra-budgetary measures. (3) Adaptability to global conditions ↓ FD very vulnerable to global auditions ↓ Huge uplift due to COVID (4) Compliance problem ↓ Monetary policy affected due to FD compliance ↓ Hence D2G led to lower productive, less spite on addressing above FD concerns.
120 words1 paragraphs
Conclusion
D2G led to lower productive measures and addresses concerns above FD framework.
12 words
Diagram
Line graph showing FD (Fiscal Deficit) trends from 2019 to 2025, with values showing uptick due to COVID and subsequent adjustments
Topper
D.S.K. Prachet
AIR 1932025
Subject & Paper
GS3GS3
Topic
Economic Development
Government Budgeting
Fiscal Consolidation and Debt Management
Writing Stats
140
Total words
1
Paragraphs
analytical
Tone