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Indian Economy

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Home/Indian Economy/Page 55

Mains Answer Writing Latest Questions

Vijeta
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VijetaBegginer
Asked: September 9, 2024In: , ,
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c.aeconomic developmenteconomic growthimportance of chartered accountant.
  1. Ansu Ann Thampy
    Ansu Ann Thampy Begginer

    The Importance of Chartered Accountants in Economic Development Chartered Accountants (CAs) play a vital role in the economic development of any country by contributing to financial stability, corporate governance, and economic policy formulation. Their expertise in financial management ensures thatRead more

    The Importance of Chartered Accountants in Economic Development

    Chartered Accountants (CAs) play a vital role in the economic development of any country by contributing to financial stability, corporate governance, and economic policy formulation. Their expertise in financial management ensures that businesses, both large and small, operate efficiently, leading to enhanced productivity and economic growth. By optimizing tax structures and ensuring compliance, CAs help boost government revenue, which can be reinvested into critical sectors like healthcare, education, and infrastructure, thereby promoting sustainable development.

    Furthermore, CAs’ audit and assurance services enhance transparency and accountability within businesses, fostering trust among investors and encouraging domestic and foreign investments. This, in turn, generates employment opportunities, stimulates economic activity, and drives overall national development.

    In addition to their work in the private sector, CAs contribute to public policy by offering insights into economic trends and financial analysis, helping governments craft effective fiscal policies. They also promote corporate governance by ensuring businesses adhere to legal and ethical standards, thus fostering a responsible and sustainable business environment.

    In conclusion, Chartered Accountants are indispensable in building a robust financial system and contributing to the long-term economic growth of a country, making them key players in national development.

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Team
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TeamSupreme
Asked: September 16, 2024In:
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Answer the question in maximum 200 words. This question carries 11 marks. [MPPSC 2023] Give an explanation of the terms “direct taxes” and “indirect taxes” in India, using an example for each.

mppsc: economic planning
  1. Nishant Desai
    Nishant Desai Learner

    Concepts of Direct Taxes and Indirect Taxes in India In India, taxes are primarily classified into direct taxes and indirect taxes, each serving distinct functions and impacting taxpayers differently. Understanding these concepts is crucial for UPSC Mains aspirants. Direct Taxes Direct taxes are thoRead more

    Concepts of Direct Taxes and Indirect Taxes in India

    In India, taxes are primarily classified into direct taxes and indirect taxes, each serving distinct functions and impacting taxpayers differently. Understanding these concepts is crucial for UPSC Mains aspirants.

    Direct Taxes

    Direct taxes are those levied directly on individuals or organizations. The burden of direct taxes cannot be transferred to another party. These taxes are based on the ability-to-pay principle, meaning they are proportional to the income or wealth of the taxpayer.

    • Income Tax: This is a prominent example of a direct tax. Individuals and corporations are required to pay taxes on their earnings. For instance, in the Financial Year 2023-24, the Union Budget introduced new tax slabs with a lower tax rate for individuals, aiming to provide relief to the middle class.
    • Corporate Tax: Companies are taxed on their profits. For example, in 2023, the Indian government reduced the corporate tax rate for domestic companies to 22% (down from 30%) to encourage investment and economic growth.
    • Wealth Tax: Though abolished in 2015, wealth tax was once a direct tax on the net wealth of individuals, including their property, stocks, and other assets.

    Indirect Taxes

    Indirect taxes are imposed on goods and services and are collected by intermediaries (such as retailers) from the end consumers. These taxes are ultimately borne by the consumer, making them less transparent than direct taxes.

    • Goods and Services Tax (GST): GST, implemented in July 2017, is a comprehensive indirect tax on the supply of goods and services. It replaced a myriad of previous indirect taxes like VAT, service tax, and excise duty. For instance, GST rates were revised in 2023 to address inflation and economic challenges, impacting the cost of goods and services.
    • Customs Duty: This is a tax on the import and export of goods. In recent developments, the Indian government increased customs duty on certain luxury items to promote domestic manufacturing and reduce reliance on imports.
    • Excise Duty: Although it is more prevalent in the context of production and manufacturing, excise duty is also an indirect tax. For example, the excise duty on petrol and diesel has been a significant revenue source for the government, though it fluctuates with international oil prices.

    Conclusion

    Both direct and indirect taxes are integral to India’s tax system, contributing to the nation’s revenue and economic stability. Direct taxes are based on individual or corporate earnings and wealth, ensuring that those with higher financial capability pay more. Indirect taxes, on the other hand, are embedded in the cost of goods and services, impacting consumers directly but often in a less apparent manner. Understanding these concepts and their recent developments is essential for a comprehensive grasp of India’s fiscal policies.

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Team
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TeamSupreme
Asked: September 16, 2024In:
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प्रश्न का उत्तर अधिकतम 200 शब्दों में दीजिए। यह प्रश्न 11 अंक का है। [MPPSC 2023] भारत में प्रत्यक्ष कर और अप्रत्यक्ष कर की अवधारणाओं की व्याख्या कीजिये। प्रत्येक का एक उदाहरण सहित वर्णन कीजिये।

mppsc: economic planning
  1. Nishant Desai
    Nishant Desai Learner

    भारत में प्रत्यक्ष कर और अप्रत्यक्ष कर दो प्रमुख प्रकार के कर होते हैं। इन दोनों प्रकार के करों की अवधारणाएं और उनके उदाहरण निम्नलिखित हैं: प्रत्यक्ष कर (Direct Tax) विवरण: प्रत्यक्ष कर वह कर है जो सीधे करदाता द्वारा सरकार को भुगतान किया जाता है। इसे करदाता की आय या संपत्ति के आधार पर लगाया जाता हैRead more

    भारत में प्रत्यक्ष कर और अप्रत्यक्ष कर दो प्रमुख प्रकार के कर होते हैं। इन दोनों प्रकार के करों की अवधारणाएं और उनके उदाहरण निम्नलिखित हैं:

    प्रत्यक्ष कर (Direct Tax)

    विवरण: प्रत्यक्ष कर वह कर है जो सीधे करदाता द्वारा सरकार को भुगतान किया जाता है। इसे करदाता की आय या संपत्ति के आधार पर लगाया जाता है और करदाता को इसका भुगतान स्वयं करना होता है। प्रत्यक्ष कर का बोझ पूरी तरह से करदाता पर होता है और इसे हस्तांतरित नहीं किया जा सकता।

    उदाहरण:

    1. आयकर (Income Tax): यह प्रत्यक्ष कर का एक प्रमुख उदाहरण है। इसमें करदाता की वार्षिक आय के आधार पर कर लगाया जाता है। यदि किसी व्यक्ति की आय ₹10 लाख है, तो उस पर आयकर की दरें लागू होती हैं, जो आय की मात्रा और कर स्लैब के आधार पर बदलती हैं। करदाता इस कर को अपनी आय के आधार पर सरकार को सीधे भुगतान करता है।

    अप्रत्यक्ष कर (Indirect Tax)

    विवरण: अप्रत्यक्ष कर वह कर है जो वस्त्रों या सेवाओं की खरीदारी पर लगाया जाता है और करदाता इस कर को खुद नहीं बल्कि अंततः उपभोक्ता से प्राप्त किया जाता है। यह कर उत्पाद या सेवा की कीमत में शामिल होता है और उपभोक्ता को इसका भुगतान करना होता है, लेकिन इसे वसूली करने की जिम्मेदारी व्यापारी या सेवा प्रदाता की होती है।

    उदाहरण:

    1. माल और सेवा कर (GST – Goods and Services Tax): यह अप्रत्यक्ष कर का एक प्रमुख उदाहरण है। GST एक सामान्य कर है जो वस्त्रों और सेवाओं की बिक्री पर लागू होता है। यदि आप एक दुकान से ₹500 की सामग्री खरीदते हैं और GST 18% है, तो कुल ₹590 का भुगतान करेंगे, जिसमें ₹90 GST के रूप में शामिल होगा। इस कर को दुकानदार सरकार को जमा करता है, लेकिन अंत में इसका बोझ उपभोक्ता पर पड़ता है।

    इन दोनों प्रकार के करों की अवधारणाओं को समझना न केवल कर प्रणाली की सुसंगतता को समझने में मदद करता है, बल्कि इससे करदाता और सरकार के बीच की वित्तीय बातचीत भी स्पष्ट होती है।

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Anita Dhruw
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Anita DhruwLegend
Asked: November 21, 2024In:
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How does the informal nature of India’s workforce impact the goal of achieving inclusive growth? Suggest the potential solutions for formalizing the economy while protecting vulnerable workers.

economicworkforce
  1. shivamx
    shivamx Learner

    Introduction India's workforce is predominantly informal, with over 90% of workers engaged in informal employment. This extensive informality poses challenges to achieving inclusive growth, as it often results in job insecurity, limited access to social security, and reduced productivity. Body ImpacRead more

    Introduction

    India’s workforce is predominantly informal, with over 90% of workers engaged in informal employment. This extensive informality poses challenges to achieving inclusive growth, as it often results in job insecurity, limited access to social security, and reduced productivity.

    Body

    Impact of Informal Workforce on Inclusive Growth

    • Limited Social Security and Welfare Benefits: Informal workers often lack access to essential welfare measures, including provident funds, pensions, health insurance, and maternity benefits, which increases their vulnerability.
      • According to the International Labour Organization (ILO), only 24% of India’s workforce has social security coverage, which exacerbates economic inequality and social exclusion.
    • Income Instability and Poverty: Informal workers on average have incomes 19% lower than formal workers (World Bank) and face unpredictable incomes and lack job security, making it challenging to escape poverty and contribute to sustained economic growth.
    • Gender Inequality in Employment: A significant proportion of female workers are engaged in informal employment, often in low-paid, unregulated jobs without maternity benefits or workplace protections.
      • 81.8% of women’s employment in India is concentrated in the informal economy (ILO)
    • Reduced Tax Revenue and Resource Allocation: The informal sector operates largely outside the tax net, leading to lower government revenue, which constrains public spending on healthcare, education, and infrastructure.
      • An estimated 50% of India’s GDP is generated by the informal sector, creating a substantial gap in potential tax collections and fiscal resources for development.
    • Limited Access to Credit and Financial Inclusion: Informal workers and enterprises often lack formal financial records, making it challenging to access credit from formal banking channels, which limits their business growth and asset creation.

    Potential Solutions for Formalising the Economy and Protecting Vulnerable Workers

    • Extending Social Security and Welfare Programs: Pradhan Mantri Shram Yogi Maan-Dhan (PMSYM) and Ayushman Bharat should be expanded to cover informal sector workers comprehensively, offering them access to pensions, health insurance, and income support.
      • This would require collaboration between the central and state governments to create a unified social security portal accessible to all workers.
    • Incentivizing Formal Employment Through Tax and Policy Support: The government can offer tax breaks and subsidies to companies that transition informal workers to formal employment, particularly in labour-intensive sectors like textiles and construction.
    • Implementing Skill Development and Training Programs: The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) should prioritise training for informal workers, equipping them with skills that facilitate formal employment.
    • Simplifying Compliance and Reducing Regulatory Burden: Simplifying labour codes and reducing compliance costs for small businesses could encourage informal enterprises to register and operate formally.
      • The Code on Wages and Occupational Safety, Health, and Working Conditions Code should be streamlined and implemented effectively.
    • Promoting Digital Financial Inclusion and Formal Credit Access: Expanding digital platforms like Jan Dhan-Aadhaar-Mobile (JAM) trinity can enable informal workers to access formal banking and credit facilities, increasing their financial stability and encouraging savings.

    Conclusion

    Formalising India’s informal workforce is crucial for achieving inclusive growth. By implementing supportive policies, enhancing financial inclusion, and providing social security, India can transition towards a more equitable and productive economy, ensuring that the benefits of growth are shared by all segments of society.

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Anita Dhruw
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Anita DhruwLegend
Asked: December 14, 2024In:
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Explain direct tax and indirect tax with examples. Differentiate it. How it is impose?

economictax
  1. Debdatta Das
    Debdatta Das Begginer

    Direct tax is a tax which is submitted by any individual or organization directly to the government as it is imposed to them based on their net worth . On the other hand Indirect tax refers to those tax are liable to pay an can be shifted to others , these are administered and governed by the CentraRead more

    Direct tax is a tax which is submitted by any individual or organization directly to the government as it is imposed to them based on their net worth . On the other hand Indirect tax refers to those tax are liable to pay an can be shifted to others , these are administered and governed by the Central Board of Indirect Taxes and Customs . Example are sales tax , customs duty etc . Direct tax governed by Central Board of Direct Taxes .

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Adheesh Raman
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Adheesh RamanLearner
Asked: January 6, 2025In:
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Roadmap for Answer Writing 1. Introduction Definition of Twin Deficit: Briefly define the Twin Deficit problem as the situation where a country experiences both a Fiscal Deficit (government’s expenditure exceeds its revenue) and a Current Account Deficit (CAD) (imports exceed exports and ...

upsc: economic planning
  1. Team
    Team Supreme

    Model Answer The Twin Deficit problem refers to a situation where a country simultaneously experiences both a fiscal deficit and a current account deficit (CAD). 1. Fiscal Deficit A fiscal deficit occurs when a government’s total expenditure exceeds its total revenue, requiring the government to borRead more

    Model Answer

    The Twin Deficit problem refers to a situation where a country simultaneously experiences both a fiscal deficit and a current account deficit (CAD).

    1. Fiscal Deficit

    A fiscal deficit occurs when a government’s total expenditure exceeds its total revenue, requiring the government to borrow to cover the gap. This is a measure of a country’s financial health and reflects the government’s borrowing requirements for the year.

    2. Current Account Deficit (CAD)

    A current account deficit arises when a country imports more goods, services, and capital than it exports, resulting in an outflow of foreign exchange. This imbalance increases the country’s reliance on foreign borrowing or investment to finance the deficit.

    Impact of the Twin Deficit Problem on the Indian Economy

    1. Crowding Out Private Investment
      When the government borrows heavily to finance its fiscal deficit, it competes with private investors for available capital. This leads to higher interest rates, reducing the resources available for private sector investment and slowing down economic growth.
      Source: Monthly Economic Review, Ministry of Finance
    2. Weakening of the Rupee
      A high current account deficit puts downward pressure on the national currency. As the demand for foreign currency increases to pay for imports, the value of the rupee declines. This depreciation makes imports, including essential commodities like crude oil, more expensive.
      Source: Ministry of Finance, RBI
    3. Decline in Forex Reserves
      A weaker rupee increases the cost of imports, which in turn leads to higher payments in foreign currencies. This drains the country’s foreign exchange reserves, reducing its ability to meet future import obligations or manage external shocks.
      Source: RBI
    4. Debt Accumulation
      If the current account deficit is not financed by foreign investment, the government must borrow more, leading to rising national debt. This further exacerbates fiscal deficits and increases the burden on future generations.
      Source: Ministry of Finance
    5. Rising Inflation
      The depreciation of the rupee and higher import costs, particularly for essential goods like fuel, contribute to inflationary pressures. This reduces the purchasing power of consumers and increases the cost of living.
      Source: RBI, Ministry of Finance
    6. Impact on Investment and Credit Rating
      A sustained fiscal deficit can harm India’s sovereign credit rating. A downgrade in the rating could make it difficult for the government to raise funds in international markets, reducing foreign investment inflows.

    Measures to Address the Twin Deficit Problem

    1. Rationalizing Expenditures
      The government must prioritize capital expenditure over non-essential spending to reduce the fiscal deficit.
    2. Follow the FRBM Act
      Adhering to the targets outlined in the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, such as reducing the fiscal deficit to 4.5% of GDP by 2025-26, will help stabilize fiscal health.
      Source: Ministry of Finance
    3. Boosting Exports and Reducing Import Dependency
      Promoting the Aatmanirbhar Bharat initiative can reduce reliance on imports and increase exports, helping to mitigate the current account deficit.
      Source: Government of India
    4. Increasing Tax Revenues
      The government can enhance tax-based revenues and reduce subsidies, while focusing on disinvestment in public enterprises to control the fiscal deficit.

    Conclusion

    The Twin Deficit problem poses a significant challenge to India’s macroeconomic stability. By addressing both fiscal and current account deficits through prudent fiscal policies, export promotion, and reducing import dependency, the country can mitigate the negative impacts of this issue. Effective management of public debt and macroeconomic stabilization measures will help achieve long-term economic sustainability.

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Adheesh Raman
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Adheesh RamanLearner
Asked: January 7, 2025In:
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Roadmap for Answer Writing Introduction Briefly state the importance of industrial policies for economic growth and development in India since independence. Key Industrial Policies Overview Organize the discussion chronologically to highlight the evolution of policies. For each policy, include: Name of the Policy Year of Implementation Key Features ...

upsc: economic planning
  1. Team
    Best Answer
    Team Supreme

    Model Answer Since gaining independence in 1947, India has implemented a series of industrial policies aimed at fostering economic growth, creating employment, and enhancing competitiveness. Here’s a brief overview of these policies: Industrial Policy Resolution, 1948: This policy established IndiaRead more

    Model Answer

    Since gaining independence in 1947, India has implemented a series of industrial policies aimed at fostering economic growth, creating employment, and enhancing competitiveness. Here’s a brief overview of these policies:

    1. Industrial Policy Resolution, 1948: This policy established India as a mixed economy, categorizing industries into four groups:
      • Exclusive monopoly of the Central government (e.g., arms, atomic energy, railways).
      • Industries reserved for the state (e.g., coal, iron and steel).
      • Industries of basic importance regulated by the government.
      • Remaining industries open to private enterprises and cooperatives. Foreign investments were restricted under this policy.
    2. Industrial Policy Resolution, 1956: Known as the “Economic Constitution of India,” this policy emphasized expanding the public sector and preventing private monopolies. It classified industries into three sectors:
      • Schedule A: Public sector (17 industries).
      • Schedule B: Mixed sector (12 industries).
      • Schedule C: Private sector only. It also highlighted the importance of small-scale industries for employment and economic decentralization.
    3. Industrial Policy Statement, 1977: This policy focused on employment generation for the poor, reducing wealth concentration, and prioritizing small-scale industries. It imposed restrictions on multinational companies (MNCs).
    4. Industrial Policy Statement, 1980: This policy aimed to promote competition, modernization, and technological upgrades. It liberalized licensing and reaffirmed the Monopolies and Restrictive Trade Practices Act (MRTP) and the Foreign Exchange Regulation Act (FERA).
    5. New Industrial Policy, 1991: Marking a significant shift, this policy aimed at liberalization, privatization, and globalization. It increased the foreign direct investment (FDI) ceiling from 40% to 51% in selected sectors and allowed 100% FDI in certain areas like infrastructure. Industrial licensing was largely abolished, except for 18 industries, and the MRTP commission was established to regulate monopolistic practices.
    6. Recent Initiatives: The National Manufacturing Policy (2011) and the Make in India scheme (2014) were launched to further enhance manufacturing capabilities and attract investment. There is an ongoing discussion about the need for a new industrial policy to ensure inclusive and sustainable growth for the future.

    These policies reflect India’s evolving approach to industrialization, balancing state control with market forces to foster economic development.

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Anita Ratnam
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Anita RatnamLearner
Asked: January 20, 2025In:
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Roadmap for Answer Writing 1. Introduction Contextualize the issue: Begin by framing the issue of growing inequality in India. Refer to Oxfam’s 2023 report that highlights the wealth disparity (top 5% owning 60% of wealth, bottom 50% owning only 3%). Key question: Mention ...

upsc: economic planning
  1. Team
    Best Answer
    Team Supreme

    Model Answer Introduction India faces growing wealth inequality, with the top 5% of the population owning more than 60% of the country's wealth, while the bottom 50% possess only 3%, as per Oxfam's 2023 report. This stark disparity has sparked debates on whether implementing a progressive wealth taxRead more

    Model Answer

    Introduction

    India faces growing wealth inequality, with the top 5% of the population owning more than 60% of the country’s wealth, while the bottom 50% possess only 3%, as per Oxfam’s 2023 report. This stark disparity has sparked debates on whether implementing a progressive wealth tax could address these inequalities.

    Potential Benefits of a Wealth Tax

    1. Reducing Wealth Disparities: A progressive wealth tax can help reduce the concentration of wealth among the richest individuals. By redistributing resources, it could foster greater economic equity, reducing social tensions and promoting fairness in society.
    2. Funding Public Services and Infrastructure: A wealth tax would generate substantial revenue for the government, which could be reinvested into critical public services such as healthcare, education, and infrastructure. For instance, a 4% tax on the wealth of the top 953 richest families could raise approximately 1% of GDP in additional taxes, which could be used to improve public welfare.
    3. Encouraging Productive Investment: By taxing wealth, individuals might be incentivized to invest their assets in productive sectors of the economy instead of hoarding them in unproductive forms of wealth. This could lead to job creation and economic growth in the long run.

    Challenges to Implementing a Wealth Tax

    1. Administrative Complexity: Implementing a wealth tax would require an extensive infrastructure for assessing, valuing, and collecting taxes on assets. This could result in high administrative costs and complications for taxpayers.
    2. Tax Evasion and Non-compliance: Wealthy individuals may find ways to evade the tax by underreporting asset values or using complex legal structures, reducing the effectiveness of the tax.
    3. Capital Flight: Critics argue that a wealth tax might lead to capital flight, where wealthy individuals move their assets abroad to avoid taxation, as seen in several European countries that abolished their wealth taxes.
    4. Impact on Wealth Creation: A wealth tax could discourage businesses from going public to avoid reporting wealth and paying taxes. This may reduce investment opportunities and harm the broader economy.

    Conclusion

    While a progressive wealth tax could address wealth inequality in India, its potential challenges—such as tax evasion, capital flight, and administrative costs—suggest that alternative fiscal policies may be more effective in reversing growing inequalities. Therefore, while the idea of a wealth tax is appealing, careful consideration of its implementation and possible alternatives is necessary.

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Anita Ratnam
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Anita RatnamLearner
Asked: January 20, 2025In:
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Roadmap for Answer Writing Introduction Define the Middle-Income Trap: A situation where an economy, after reaching middle-income status, struggles to transition to high-income status due to several growth limitations. Source: World Bank (2022): Countries with a per capita Gross National Income (GNI) between ...

upsc: economic planning
  1. Team
    Best Answer
    Team Supreme

    Model Answer The middle-income trap refers to a situation where a country, after experiencing rapid growth and reaching a middle-income status, struggles to move further towards high-income levels. These economies face challenges from low-cost competitors while lacking the necessary institutional, hRead more

    Model Answer

    The middle-income trap refers to a situation where a country, after experiencing rapid growth and reaching a middle-income status, struggles to move further towards high-income levels. These economies face challenges from low-cost competitors while lacking the necessary institutional, human, and technological capabilities to advance.

    India’s Risk of Falling into the Trap

    India has been classified as a middle-income country since 2008, with a per capita Gross National Income (GNI) between $1,086 to $13,205 (World Bank, 2022). The country is at risk of falling into the middle-income trap due to challenges like overreliance on demand from the wealthiest 100 million citizens, rising income inequality, and limited expansion of the demand base among the poor, all of which constrain growth.

    Strategies for Avoiding the Middle-Income Trap

    1. Improving Total Factor Productivity (TFP)
      India must invest in R&D, manufacturing efficiencies, and human capital development to boost factor productivity. South Korea’s success in leveraging TFP through innovation by conglomerates like LG and Samsung exemplifies this strategy’s potential to elevate a country’s economic status.
    2. Land Reforms
      Streamlining land acquisition processes and addressing land disputes is crucial. As 66% of civil cases in India are related to land, resolving such disputes could unlock significant investment opportunities, estimated at USD 200 billion.
    3. Focus on Manufacturing
      Labor-intensive manufacturing can diversify India’s economy, create jobs, and enhance competitiveness globally. Successful industrialization strategies in South Korea and Singapore show the importance of foreign direct investment (FDI) and industrial policy in avoiding the trap.
    4. Investing in Human Capital
      With India ranking 116th in the Human Capital Index (2022), investment in education, skill development, and innovation is essential to bridge income disparities and drive productivity. Countries like Japan and Singapore have avoided the middle-income trap by reskilling their workforce and driving innovation.
    5. Export Diversification
      Moving up the value chain by focusing on high-value exports such as technical textiles and eco-friendly products could boost India’s export revenues, helping the nation progress towards high-income status.
    6. Stimulating Domestic Demand
      Policies like GST reduction, enhanced employment creation, and universal basic income can boost domestic consumption, ensuring sustainable economic growth.

    Conclusion

    To avoid the middle-income trap, India must focus on a diversified economic approach, investing in human capital, manufacturing, and exports while addressing structural challenges. By sustaining its growth momentum for the next 15 years, India can transition to a high-income economy.

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Rajashree Shirke
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Rajashree ShirkeLearner
Asked: January 22, 2025In:
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Roadmap for Answer Writing 1. Introduction  Brief Introduction: Start by mentioning the PM-KISAN Scheme launched in 2019 to provide financial support to landholding farmers. Objective: Highlight the scheme’s goal to alleviate liquidity constraints by providing ₹6,000 annually to eligible farmer families. Context: Acknowledge the ...

upsc: economic planning
  1. Team
    Best Answer
    Team Supreme

    Model Answer The PM-KISAN Scheme, launched in 2019, aims to provide income support of ₹6,000 annually to all landholding farmer families. While over 11 crore farmer families have benefitted from its direct benefit transfer (DBT) mechanism, the scheme faces several significant challenges. Key BenefitRead more

    Model Answer

    The PM-KISAN Scheme, launched in 2019, aims to provide income support of ₹6,000 annually to all landholding farmer families. While over 11 crore farmer families have benefitted from its direct benefit transfer (DBT) mechanism, the scheme faces several significant challenges.

    Key Benefits of the Scheme

    1. Income Support
      • Direct annual transfer of ₹6,000 in three installments has helped alleviate liquidity issues for farmers.
      • Fact: Over 11 crore farmer families benefitted by February 2024.
    2. Elimination of Middlemen
      • Use of DBT ensures funds reach farmers directly without leakage.
    3. Encouragement of Productive Investment
      • Fact: According to an IFPRI study, 52% of the first installment was spent on agriculture, while 26% was used for consumption.

    Challenges with the Scheme

    1. Low Coverage
      • The scheme has not reached all potential beneficiaries due to administrative and logistical hurdles.
      • Fact: In Bihar, only 82.50 lakh farmers out of 164 lakh operational landholdings were registered as of August 2021.
    2. Misallocation of Funds
      • Poor beneficiary identification and monitoring have led to financial mismanagement.
      • Fact: The CAG 2020-21 report found ₹131.40 lakh wrongly disbursed to Haryana state government pensioners.
    3. Evolving Compliance Requirements
      • Introduction of Aadhaar-based payment systems, mandatory e-KYC, and ABPS disrupted effective implementation.
      • Fact: Many farmers were excluded due to these compliance changes, with 2.4 lakh farmers unable to link Aadhaar with bank accounts.
    4. Decline in Fund Disbursement
      • The scheme’s reach has decreased over time.
      • Fact: Beneficiaries reduced from 11.84 crore in the first installment to 3.87 crore in the 11th installment, marking a 67% drop in payouts.
    5. Operational Challenges
      • Issues with registration processes, Aadhaar linkage errors, and database maintenance impede timely fund transfer.

    Conclusion

    Despite its transformative potential, the PM-KISAN Scheme struggles with low coverage, compliance hurdles, and fund misallocation. Addressing these challenges by improving beneficiary identification, simplifying processes, and strengthening monitoring mechanisms is essential to maximize its impact. The government’s plan to evaluate the scheme is a positive step toward ensuring its long-term success.

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