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3)The new Fiscal Responsibility and Budget Management (FRBM) Committee has recommended lowering India’s public debt to 60% of GDP by FY25 (from about 70% now); this can only be achieved if India’s states also keep their deficits in check. Examine.(250 words)

TOPIC: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure

3)The new Fiscal Responsibility and Budget Management (FRBM) Committee has recommended lowering India’s public debt to 60% of GDP by FY25 (from about 70% now); this can only be achieved if India’s states also keep their deficits in check. Examine.(250 words)

Financial express

Why this question

The ToR of 15th FC has brought back the focus on distribution of revenues between centre and states and state finances. Economic survey last year had also analysed this topic in detail. With global debt increasing world over, it is important to examine whether the states need to tighten their spending to comply with the requirements of FRBM

 

Key demand of the question

We have to explain the recommendation of NK Singh committee, the rationale behind it, how and why is it important for the states to comply with the recommendations, what’s hampering the states from complying with it, what measures centre has taken to ensure that states are able to complying with the debt limits and what else needs to be done for the same.

 

Directive word

Examine – We have to probe deeper into the topic,  get into details, and find out the causes or implications if any. The various aspects which has to be mentioned is highlighted in the section above.

 

Structure of the answer

Introduction – Explain FRBM Act and the recommendation of NK Singh committee

 

Body

  • Status quo – how effectively are states complying  with the requirement
  • Why is it important for states to comply – mention the implications of not complying
  • Roadblocks in the way of states from achieving target – development expenditure, pay commission fulfillment etc
  • Steps that centre has taken to ensure states comply
  • What more can be done to make states comply with the FRBM requirement. Here you can take inputs from 2016-17 economic survey.

 

Conclusion – mention that keeping debt levels in check is critical for the economy and highlight the sensitivity of the issue.