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Home/upsc: economic planning

Mains Answer Writing Latest Questions

Bharti Singh
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Bharti SinghBegginer
Asked: June 19, 2024In:
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Emphasize the importance of the Mega Food Park Initiative. Talk about the accompanying difficulties as well. (Answer in 200 words)

upsc: economic planning
  1. Gauri Tekale
    Gauri Tekale Begginer

     Significance of the Mega Food Park Scheme   The Mega Food Park Scheme, initiated by the Government of India, aims to enhance the food processing sector by providing a mechanism to link agricultural production to the market. Here are the key points highlighting its significance:   Boost toRead more

     Significance of the Mega Food Park Scheme

     

    The Mega Food Park Scheme, initiated by the Government of India, aims to enhance the food processing sector by providing a mechanism to link agricultural production to the market. Here are the key points highlighting its significance:

     

    1. Boost to Agricultural Sector: By creating a direct link between farmers and processing units, the scheme helps in reducing the wastage of perishable agricultural produce, ensuring better returns for farmers.

     

    1. Employment Generation: Establishing food processing units and ancillary infrastructure generates significant employment opportunities, especially in rural areas, contributing to the reduction of rural-urban migration.

     

    1. Economic Development: The development of food parks fosters economic growth by encouraging investments in the food processing sector, thus boosting GDP and contributing to the nation’s economic development.

     

    1. Infrastructure Development: The scheme promotes the development of world-class infrastructure facilities for food processing, including cold chains, packaging centers, and logistics facilities, which enhances the overall efficiency of the supply chain.

     

    1. Promotion of MSMEs: It provides a conducive environment for the growth of Micro, Small, and Medium Enterprises (MSMEs) in the food processing sector by offering them access to modern infrastructure and facilities.

     

    1. Reduction in Food Wastage: By facilitating better processing, storage, and transportation of food products, the scheme aims to minimize post-harvest losses and food wastage, ensuring food security.

     

    1. Value Addition: The scheme encourages value addition to agricultural produce, resulting in higher profitability and a wide range of processed food products for domestic consumption and export.

     

    1. Quality and Safety Standards: Establishing state-of-the-art food processing units ensures adherence to international quality and safety standards, enhancing the competitiveness of Indian food products in global markets.

     

    One success story highlights the impact and potential of the Mega Food Park Scheme in India. Here are a few notable examples:

     

    1. Patanjali Food and Herbal Park (Uttarakhand)

    Overview: One of the most successful mega food parks, the Patanjali Food and Herbal Park, is located in Haridwar, Uttarakhand. It is operated by Patanjali Ayurved Ltd.

     

    Achievements:

    – Economic Growth: The park has significantly contributed to the economic development of the region, attracting substantial investments.

    – Job Creation: Thousands of jobs have been created, providing livelihoods to many residents.

    – Value Addition: The park focuses on processing herbal and Ayurvedic products, adding considerable value to raw agricultural produce.

    – Export Growth: Patanjali products processed here have a strong presence in international markets, boosting India’s export earnings.

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Krishna Rao
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Krishna RaoLearner
Asked: July 25, 2024In:
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Examine the government’s initiatives to enhance the effectiveness and openness of the public investment management system, including the application of outcome-based monitoring, performance-based budgeting, and data-driven decision-making, and determine how they will affect the standard and impact of public spending.

upsc: economic planning
  1. Hansika Naidu
    Hansika Naidu Learner

    The Indian government has taken several steps to improve the efficiency and transparency of the public investment management system, with the aim of enhancing the quality and impact of public expenditure. Some of the key initiatives and their impact are as follows: Performance-Based Budgeting: The gRead more

    The Indian government has taken several steps to improve the efficiency and transparency of the public investment management system, with the aim of enhancing the quality and impact of public expenditure. Some of the key initiatives and their impact are as follows:

    1. Performance-Based Budgeting:
      • The government has introduced performance-based budgeting, which links budget allocation to the achievement of specific targets and outcomes.
      • This approach is intended to improve the accountability and effectiveness of public spending by aligning resource allocation with the desired development objectives.
      • Initiatives like the Outcome Budget and the Government e-Marketplace (GeM) platform have been implemented to facilitate this shift towards performance-based budgeting.
    2. Outcome-Based Monitoring:
      • The government has emphasized the need for outcome-based monitoring, which focuses on tracking the actual impact and results of public programs and schemes, rather than just the inputs or outputs.
      • This includes the use of key performance indicators (KPIs) and the regular monitoring and evaluation of program performance.
      • Initiatives like the NITI Aayog’s Development Monitoring and Evaluation Office (DMEO) have been established to strengthen the monitoring and evaluation framework.
    3. Data-Driven Decision-Making:
      • The government has made efforts to enhance the use of data and evidence in public investment decision-making processes.
      • This includes the development of data portals, such as the India Data Portal and the Open Government Data Platform, to improve the availability and accessibility of government data.
      • Initiatives like the Expenditure Management Commission have been tasked with recommending ways to improve the efficiency and transparency of public expenditure based on data-driven analysis.

    Impact on Improving Public Expenditure:

    1. Enhanced Accountability and Transparency:
      • The adoption of performance-based budgeting and outcome-based monitoring has increased the transparency and accountability of public spending, as the government is now required to justify resource allocation based on tangible results.
    2. Improved Efficiency and Rationalization of Expenditure:
      • The focus on data-driven decision-making and the linkage of budgets to performance outcomes have encouraged the government to identify and address inefficiencies, leading to the rationalization of public expenditure.
    3. Alignment with Development Priorities:
      • The shift towards outcome-based monitoring has helped align public investment with the government’s development priorities and ensure that resources are directed towards the most pressing needs.
    4. Challenges and Limitations:
      • While the government’s efforts are commendable, the implementation of these initiatives has faced some challenges, such as the availability and quality of data, capacity constraints within government agencies, and the need for a more comprehensive and integrated approach to public investment management.

    Overall, the government’s initiatives to improve the efficiency and transparency of the public investment management system have shown promising results, but sustained efforts are required to fully realize the potential of these reforms and ensure that public expenditure has a meaningful impact on the country’s development priorities.

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Vihaan Choudhury
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Vihaan ChoudhuryLearner
Asked: January 22, 2025In:
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Roadmap for Answer Writing Introduction: Briefly introduce India’s defense sector, highlighting the need for indigenization, domestic procurement, and boosting defense exports. Mention the importance of these areas for national security and economic growth. Institutional and Policy Changes Driving Indigenization: Defense Procurement Procedure (DPP) 2016: Discuss ...

upsc: economic planning
  1. Team
    Best Answer
    Team Supreme

    Model Answer India's defense sector has seen significant changes through strategic institutional and policy measures that have facilitated indigenization, domestic capital procurement, and defense exports. 1. Defense Indigenization: The Government of India has taken several steps to reduce relianceRead more

    Model Answer

    India’s defense sector has seen significant changes through strategic institutional and policy measures that have facilitated indigenization, domestic capital procurement, and defense exports.

    1. Defense Indigenization:
    The Government of India has taken several steps to reduce reliance on imports and foster indigenization:

    • Defense Procurement Procedure (DPP) 2016: This introduced the ‘Buy Indian-IDDM’ (Indigenously Designed, Developed, and Manufactured) category to prioritize indigenous equipment.
    • Defense Acquisition Procedure (DAP) 2020: Emphasized increasing indigenous content in defense procurement. Between 2016-2020, 86 capital acquisition proposals were categorized under this initiative.
    • Indigenization of Components: A policy was introduced to indigenize defense components and sub-assemblies. For instance, 1,499 items were indigenized against a target of 1,244 in 2020-21.
    • Bilateral Agreements: Agreements such as the one signed in 2019 with Russia have promoted joint manufacturing of spares and components.

    2. Domestic Capital Procurement:
    India has allocated significant resources to support domestic defense industry growth:

    • Budgetary Support: In 2022-23, 25% of the domestic capital procurement budget was earmarked for the private defense industry.
    • Innovation Incentives: Rs. 1,500 Crore was allocated for procurement from startups to encourage technological innovation.

    3. Defense Exports:
    India has actively promoted defense exports, resulting in a 32.5% year-on-year growth in 2023-24:

    • Streamlining Export Process: The establishment of defense export promotion cells and the Defence Exim Portal has simplified export procedures.
    • Promotional Efforts: Platforms like Aero India exhibitions have helped increase international outreach.

    Challenges Remaining: Despite these efforts, challenges persist:

    • Production Shortfalls: India’s defense production has not met the armed forces’ requirements, with domestic procurement remaining stagnated at around 60% of the total needs.
    • Technology Gaps: The domestic industry still faces significant gaps in designing and manufacturing major systems and critical components.
    • Private Sector Participation: Limited long-term contracts and complex procurement procedures have hindered private sector involvement.
    • Skilled Labor Deficit: There is a shortage of skilled workers, especially in high-tech areas like aeronautical engineering and cybersecurity.

    Addressing these challenges will require further collaboration between the government, industry, and academia, with enhanced investments in R&D and skill development.

    Highlights

    • Policy Measures: DPP 2016, DAP 2020, and initiatives for indigenization and procurement from startups.
    • Growth in Exports: 32.5% increase in exports in 2023-24, supported by simplified processes and international promotions.
    • Challenges: Production limitations, technological gaps, private sector involvement, and skilled labor shortages.
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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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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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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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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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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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Team
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TeamSupreme
Asked: September 12, 2024In:
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Answer the question in maximum 200 words. This question carries 11 marks. [MPPSC 2023] Talk about the financial side of state-federal ties while referencing the “One Nation, One Tax” policy.

upsc: economic planning
  1. Dr sangeeta Singh
    Dr sangeeta Singh Learner

    The financial aspect of Centre-State relations in India has undergone significant changes with the implementation of the Goods and Services Tax (GST), also known as the "One Nation One Tax" regime. *Pre-GST Scenario:* 1. Multiple taxes: Central sales tax, state VAT, excise duty, etc. 2. Complex taxRead more

    The financial aspect of Centre-State relations in India has undergone significant changes with the implementation of the Goods and Services Tax (GST), also known as the “One Nation One Tax” regime.

    *Pre-GST Scenario:*

    1. Multiple taxes: Central sales tax, state VAT, excise duty, etc.
    2. Complex tax structure: Different tax rates, exemptions, and compliance requirements.
    3. Revenue sharing: Centre and states shared taxes, with states receiving a significant portion.

    *GST Regime (Post-2017):*

    1. Unified tax: Single tax rate for goods and services across India.
    2. Dual GST: Central GST (CGST) and State GST (SGST) components.
    3. GST Council: Centre and states jointly decide tax rates, exemptions, and policies.

    *Financial Implications:*

    *Centre:*

    1. Reduced revenue: GST rates lower than pre-GST taxes.
    2. Compensation: Centre compensates states for revenue loss (5-year period).

    *States:*

    1. Increased autonomy: States have more control over taxation.
    2. Revenue growth: GST revenue growth benefits states.
    3. Dependence on Centre: States rely on Centre for compensation and GST Council decisions.

    *Challenges:*

    1. Revenue distribution: Disparities in revenue sharing between Centre and states.
    2. Tax rate disputes: Differences in GST rates between Centre and states.
    3. Compliance issues: Difficulty in implementing and enforcing GST.

    *Benefits:*

    1. Simplified tax structure
    2. Reduced tax evasion
    3. Increased transparency
    4. Boost to economic growth

    *Centre-State Relations:*

    1. Cooperative federalism: GST Council promotes collaboration.
    2. Increased dependence: States rely on Centre for revenue and policy decisions.
    3. Potential conflicts: Disagreements over revenue sharing, tax rates, and exemptions.

    *Reforms:*

    1. Improve GST compensation mechanism
    2. Enhance states’ autonomy in taxation
    3. Streamline compliance procedures
    4. Address revenue disparities

    *Conclusion:*

    The “One Nation One Tax” regime has transformed Centre-State financial relations in India. While challenges persist, the GST regime has simplified taxation, increased transparency, and boosted economic growth. Ongoing reforms aim to address revenue disparities, enhance state autonomy, and strengthen cooperative federalism.

     

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Team
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TeamSupreme
Asked: September 10, 2024In:
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Roadmap for Answer Writing 1. Introduction Context: Briefly introduce the Planning Commission’s establishment in 1950 and its replacement by NITI Aayog in 2015. Significance: Highlight the importance of understanding the differences in their principles to grasp India’s developmental strategy. 2. Key Differences in Principles A. ...

upsc: economic planning
  1. Team
    Team Supreme

    Model Answer Introduction India's Planning Commission was established in 1950, inspired by the Soviet model, to design five-year plans. In 2015, it was replaced by the National Institution for Transforming India (NITI) Aayog, reflecting the evolving needs of the nation. Key Differences in PrinciplesRead more

    Model Answer

    Introduction

    India’s Planning Commission was established in 1950, inspired by the Soviet model, to design five-year plans. In 2015, it was replaced by the National Institution for Transforming India (NITI) Aayog, reflecting the evolving needs of the nation.

    Key Differences in Principles

    1. Approach to Policy Formulation

    • NITI Aayog: Adopts a bottom-up approach, engaging various stakeholders and states in policy-making.
    • Planning Commission: Operated on a top-down approach, where decisions were made centrally and imposed on states.

    2. Ideological Basis

    • Planning Commission: Rooted in socialist ideals, which became less relevant post-Liberalization, Privatization, and Globalization (LPG) reforms.
    • NITI Aayog: Aims for competitive federalism in a free market economy, encouraging states to compete in development.

    3. Competitive Federalism

    • NITI Aayog: Implements online dashboards to rank states on various development indicators, facilitating the sharing of best practices.
      • Fact: Indicators include the Sustainable Development Goals (SDG) India Index and Health Index.
    • Planning Commission: Did not emphasize such competitive metrics.

    4. Decentralization and Participation

    • NITI Aayog: Promotes participatory decision-making with state involvement, enhancing cooperative federalism.
    • Planning Commission: Functioned as a centralized body, often led by union ministers or technocrats.

    5. Financial Powers

    • Planning Commission: Allocated funds directly to states.
    • NITI Aayog: Functions as an advisory body, lacking direct financial powers.

    6. Focus on Inclusive Growth

    • NITI Aayog: Prioritizes inclusive growth, addressing regional disparities and fostering balanced development.
    • Planning Commission: Aimed for similar goals but was often criticized for its top-down approach.

    7. Coordination Role

    • NITI Aayog: Enhances coordination among central and state governments, exemplified by initiatives like the 115 Aspirational Districts.
    • Planning Commission: Lacked this level of inter-ministerial and inter-governmental convergence.

    8. Relationship with Government

    • NITI Aayog: Acts as a think tank, maintaining intellectual distance from the government.
    • Planning Commission: Was closely tied to governmental operations.

    Conclusion

    While both NITI Aayog and the Planning Commission aim for socio-economic transformation, NITI Aayog’s approach is more modern, inclusive, and less bureaucratic, positioning it as a pivotal player in India’s development narrative.

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