Daily Answer Writing

Model Answer

Fiscal Stability of States in India

1. High Debt Burden: States such as Punjab, Rajasthan, and Kerala have been struggling with high debt. The cumulative debt of states rose from 19.1% of GDP in 2018-19 to 25.1% in 2021-22 (RBI report). This rising debt is a significant concern for fiscal stability.
2. Declining Revenues: The share of states’ own revenue has fallen dramatically from 69% in 1955-56 to below 38% in 2019-20. The slow growth in tax revenue, compounded by the loss of autonomy over tax rates under the GST regime, has weakened state finances further.
3. High Expenditure: States face a high proportion of committed expenditure, including social welfare schemes, pensions, and debt interest. This limits the fiscal space available for development.
4. Contingent Liabilities: Off-budget borrowings, such as through state PSUs and SPVs, are increasing liabilities without clear accountability, contributing to fiscal instability.
5. DISCOM Losses: Debt burdens from state-owned DISCOMS (electricity distribution companies) further strain state finances, as these enterprises often fail to generate sufficient revenue.
6. Legal Loopholes: State governments have resorted to extra-budgetary borrowings to fund populist schemes, sometimes circumventing fiscal responsibility legislation.

Measures to Improve Fiscal Stability

1. Expenditure Prioritization and Debt Consolidation: States should focus on reducing non-essential expenditures, prioritize debt consolidation, and ensure adherence to the Fiscal Responsibility and Budget Management (FRBM) Act.
2. Cap Excessive Borrowings: States should limit borrowings, especially for populist measures, to avoid long-term fiscal instability.
3. Rationalizing Centrally Sponsored Schemes: Greater flexibility should be provided to states in implementing these schemes to better cater to regional needs.
4. Increasing Revenue Generation: States need to focus on improving the tax-to-GDP ratio, which stands at 17%. Efforts should also be made to curb the black economy, which hampers state revenue.
5. Reforming the GST and Compensation Mechanism: Addressing issues related to GST compensation and ensuring its continuity will help improve state finances.

By implementing these measures, states can work towards achieving long-term fiscal stability, ensuring a healthier financial future for both the state and its citizens.

Model Answer

Introduction

India’s animation and VFX industry has witnessed remarkable growth, driven by advancements in technology and government support. Animation, which involves creating motion through images, and VFX (Visual Effects), which enhances real footage with computer-generated imagery (CGI), are now integral to the country’s entertainment landscape.

According to the KPMG India-FICCI report, India’s animation and VFX industry grew by 17% in 2018. Several factors have contributed to this growth:

1. Government Initiatives and Incentives: National and state-level subsidies, fiscal incentives, and the creation of local hubs have played a crucial role. Programs like ‘Make in India’ and ‘Digital India’ have fueled investments in the sector, creating employment and promoting indigenous talent.
2. Increased Demand for Domestic IP: There is growing demand for domestic intellectual property in animation and VFX, catering not only to international projects but also to domestic productions. The success of movies like Baahubali in 2015 showcased India’s VFX capabilities.
3. Online Streaming Services: The rise of platforms like Netflix and Amazon Prime has surged demand for CGI-based content. Indian studios are increasingly collaborating on global and domestic projects for films and web series.
4. Application Across Multiple Sectors: Animation and VFX are no longer limited to the entertainment industry. They are widely used in education, medicine, architecture, games, and virtual reality, expanding the industry’s reach.
5. Cost-Effectiveness and Talent Pool: India’s cost-effective production, combined with a growing pool of creative talent, makes it a preferred destination for global studios. Moreover, the inclusion of animation and VFX in visual arts curricula has better prepared the workforce for industry demands.

In conclusion, with its growing consumer base and support from multiple sectors, India’s animation and VFX industry is poised to more than double in size in the coming years, marking its global emergence.

Model Answer

Introduction

After being declared extinct in 1952, cheetahs are being reintroduced in India under Project Cheetah, the world’s first inter-continental large wild carnivore translocation project. This effort aims to restore the presence of cheetahs, a top predator that plays a vital role in maintaining ecological balance.

Significance of Identifying Potential Sites

Identifying appropriate sites for reintroduction is crucial for ensuring the long-term survival of cheetahs in India. Ten potential sites across Rajasthan, Gujarat, Madhya Pradesh, Uttar Pradesh, and Chhattisgarh have been identified, including Sanjay-Dubri Tiger Reserve, Kuno-Palpur, and Shahgarh Landscape in Jaisalmer. Each site offers unique advantages, such as habitat suitability and prey availability, contributing to a sustainable cheetah population.

1. Restoring Ecological Balance: Cheetahs, as top predators, help regulate prey populations and maintain biodiversity in grassland and open forest ecosystems.
2. Conservation of Other Species: By protecting cheetah habitats, India can conserve other endangered species like the Great Indian Bustard and cheetah prey.
3. Boosting Local Economy: Cheetah conservation may enhance eco-tourism and support livelihoods in nearby communities through eco-development projects.

Challenges in Reintroduction

1. Low Prey Density: Some potential sites, such as Sanjay-Dubri and Kuno-Palpur, need more prey development to support cheetahs.
2. Human-Wildlife Conflict: Cheetahs require large territories, and their tendency to roam outside protected areas may bring them into conflict with humans and livestock.
3. Predator Competition: Cheetahs may face threats from larger predators like tigers and leopards, which could limit their survival.
4. Climate Adaptation: African cheetahs might struggle to adapt to India’s unique climate and landscapes.
5. Community Displacement: The relocation of local villages for habitat creation presents socio-economic challenges and could lead to opposition.

In summary, while reintroducing cheetahs is significant for ecosystem conservation, challenges like prey scarcity, competition, and human interactions must be addressed for the project’s success.

Model Answer

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was established to enforce fiscal discipline and ensure long-term macroeconomic stability in India. The main objectives of the FRBM Act are as follows:

1. Inter-generational Equity: The government aims to maintain fiscal policies that do not burden future generations with excessive debt.
2. Macroeconomic Stability: The Act targets achieving a revenue surplus to ensure long-term economic stability.
3. Remove Fiscal Obstacles to Monetary Policy: By controlling fiscal deficits, the Act ensures that fiscal policies do not interfere with effective monetary policy by the Reserve Bank of India (RBI).
4. Effective Debt Management: The FRBM Act aims to manage India’s debt effectively by limiting deficits and borrowing.
5. Inflation Control: The Act gives the RBI flexibility to address inflationary concerns in India.
6. Equitable Debt Distribution: The goal is to ensure a more balanced distribution of India’s debt across different periods.

Key Features of the FRBM Act

The key features of the FRBM Act include:

1. Deficit Reduction Targets: The government is required to reduce fiscal and revenue deficits, with the aim of eliminating the revenue deficit by 2009 and achieving an adequate revenue surplus thereafter.
2. Expenditure Cuts: If deficits cannot be reduced through tax revenues, the government must cut expenditures.
3. Exceptional Circumstances: The Act allows for deviations from deficit targets in cases of national security threats, natural calamities, or other exceptional situations specified by the government.
4. Borrowing Limits: The government cannot borrow directly from the RBI, except for temporary advances to cover short-term cash flow issues.
5. RBI’s Role: Starting from 2006-07, the RBI is prohibited from subscribing to the primary issuance of central government securities.
6. Transparency: The government must ensure greater transparency in fiscal operations, providing three key reports to Parliament: the Medium-term Fiscal Policy Statement, Fiscal Policy Strategy Statement, and Macroeconomic Framework Statement.
7. Quarterly Reviews: A quarterly review of trends in receipts and expenditure must be submitted to both Houses of Parliament.

The NK Singh Committee, in 2016, reviewed the Act and suggested updating targets, including reducing the debt-to-GDP ratio to 60% by 2023, with 40% for the Centre and 20% for the states. It also recommended adjusting the fiscal deficit target to 2.5% by 2023, introducing a range of fiscal targets with escape clauses for emergencies.