Roadmap for Answer Writing Introduction to Green Accounting: Define green accounting and its objective of integrating environmental costs into financial assessments. Mention the significance of green accounting in fostering sustainable development. Importance of Green Accounting in India: Highlight the role of green accounting in policy-making ...
Model Answer How Rising Public Debt Burdens the Economy Rising public debt imposes significant pressures on an economy in various ways: Burden on Future Generations Public debt transfers the financial burden to future generations. Governments issue bonds to raise funds for current expenditures, whicRead more
Model Answer
How Rising Public Debt Burdens the Economy
Rising public debt imposes significant pressures on an economy in various ways:
- Burden on Future Generations
Public debt transfers the financial burden to future generations. Governments issue bonds to raise funds for current expenditures, which will need to be repaid in the future. This means that the next generation will bear the responsibility of repaying the debt, often through higher taxes or reduced government spending (Source: FRBM Act, 2003). - Increased Interest Payments
As public debt rises, the government must allocate a larger portion of its budget to pay interest on the debt. This reduces the funds available for essential services, like education, healthcare, and infrastructure. Over time, higher interest payments can crowd out other critical investments in the economy (Source: Government of India). - Inflationary Pressures
Excessive government borrowing can lead to inflation. Increased borrowing often raises interest rates, making it costlier for businesses and consumers to borrow. Moreover, higher government spending increases aggregate demand, which can drive up prices (Source: RBI reports). - Crowding-Out Private Investment
Public borrowing can lead to “crowding out” of private investment. When the government issues bonds to finance its deficits, it competes with private companies for available funds. This can lead to higher interest rates, making it more difficult for businesses to obtain credit for expansion (Source: Economic Survey, 2020).
Measures Under the Fiscal Responsibility and Budget Management Act, 2003
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted to manage public debt and ensure fiscal discipline:
- Fiscal Deficit Target
The Act mandates the government to reduce the fiscal deficit to below 3% of GDP. This limit ensures the government does not overspend beyond its means and curtails excessive borrowing (Source: FRBM Act, 2003). - Revenue Deficit Elimination
It also requires the government to eliminate the revenue deficit and work towards creating a revenue surplus. This enhances fiscal health by ensuring that the government’s recurring expenditures are covered by its regular income (Source: Ministry of Finance). - Borrowing Constraints
The Act restricts borrowing from the Reserve Bank of India, ensuring that the government does not excessively rely on the central bank for financing. This reduces inflationary pressures and ensures that monetary policy remains independent (Source: FRBM Act, 2003).
In conclusion, the FRBM Act provides a structured framework for managing public debt, aiming for long-term macroeconomic stability by curbing excessive borrowing and promoting fiscal responsibility.
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Model Answer Importance of Green Accounting in India Better Policy-making and Sustainable Growth Fact: Green accounting enables informed policy decisions balancing economic growth with environmental conservation. Source: Ministry of Environment, Forest and Climate Change, India. Biodiversity ConservRead more
Model Answer
Importance of Green Accounting in India
Better Policy-making and Sustainable Growth
Biodiversity Conservation
Promotes Innovation
Improved Quality of Life
Enhanced Corporate Social Responsibility
Access to Capital
Obstacles in Green Accounting Implementation in India
Developmental Imperatives
Lack of Reliable Data
Absence of Multisectoral Accounting
Additional Costs
Lack of Accountability
Efforts at various levels are crucial to establish effective policies and incentives for a universal green accounting system in India to ensure sustainable development and preserve natural resources for future generations.
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