GENERAL STUDIES – Daily answer Writing Challenge

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I. Answer all the following questions in about 400 words each: 2 x 20 = 40

1)       Critically evaluate the process of economic planning in India.

2)     “The major objectives of planning in India are not only broad but open-ended.” Elaborate.

II. Answer all the following questions in about 200 words each: 6 x 10 = 60

1)       Highlight the importance of savings and investments in domestic resource mobilization.

2)     The Tenth Five year plan clearly accepted the ‘agriculture sector,’ hitherto neglected in previous plans, as the Prime Moving Force of the Indian economy. What were its key suggestions for this sector and how did it highlight the importance of agriculture? Explain.

3)      What do you understand by multi-level planning? Evaluate its performance.

4)     What is a resource? Throw light on the various resources available for financing the plans in India.

5)     What is deficit financing? What is its effect on the economy?

6)     What are the sources of revenue for Panchayat Raj Institutions in India? How do they manage to mobilize resources to carry on developmental works?

Tomorrow’s topic:

Indian Music & Painting                                         

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  • e3

    Good evening Sir,

    Are you have any plans to have volunteers for GS answer writing also?

  • I. Answer all the following questions in about 400 words each:
    1) Critically evaluate the process of economic planning in India.

    • Sanjhi

      Objectives of planning in India:

      Planning refers to the process of setting up a set of policies to decide on resource mobilization and allocation to achieve certain developmental goals on the lines of the ideals in the Directive Principles, such as economic and social equality, reduction of poverty, employment generation, etc.

      India went for the planning model ever since Independence because our development was to be based on socialism.

      Achievements of Planning over the years:

      Increase in national and per capita income. Importantly, we managed to break away from the Hindu rate of growth and achieved even a 8% growth.
      Increase in agricultural production through Green Revolution
      Diversification of industry: focus was on heavy industrialization earlier. Now we have set up several indigenous industries such as chemical, textiles, steel, etc.
      Developments in science and technology: we now even export technical experts, eg. India will help Syria dismantle its chemical weapons
      Development of education sector through establishment of several world-class institutions in agriculture, science and management.

      Over the years, certain limitations of planning have also come to the fore, for example:-

      lack of perspective and evaluation: successive five year plans are not based on a proper evaluation of the achievements of the earlier plans
      lack of decentralization in planning particularly due to the precarious financial situation of local bodies
      lack of balanced regional development
      excessive focus on public sector units which have become houses of corruption and inefficiency
      increasing politicisation of the planning process: coalition politics at the centre has paralyzed decision making in accordance with the five year plans.

      Changing role of planning: Despite the above limitations, planning has adopted a different role particularly after 1991. Now the objective of planning is more indicative, i.e. to lay down broad policies as opposed to being imperative. National Development Council has been revived and mid-term review of FYP is introduced for regular evaluation. Finances of local bodies have been given a boost by the 13th Finance Commission. There is increasing effort to achieve regional development through focus on backward states as seen by the recent report by Raghuram Rajan regarding grants to backward states.

      Thus, planning has evolved over time with the corresponding political and economic situation. Need of the hour is to adopt measures to remove these limitations and implement planning with a reformed approach.

      • very nice answers. keep it up

      • Nice way to approach the question. I think its good.

      • Ravi Kumar

        Nice Answer…!

      • Dhanabal

        Nice answer!
        One major note “India went for the planning model ever since Independence because our development was to be based on socialism.” – Not true, we follow mixed economy(mix of Socialist and Capitalist) ever since Independence.

      • wesleygummadi87

        impressive answer

    • alteracc34

      Q – Critically evaluate the process of Economic Planning in India (400words)
      Ans: The process of Economic Planning in India has multiple objectives like dealing with problems of development, poverty, backwardness, recourse mobilization, investment, technological advancement, industrial development, agricultural expansion and social justice.
      The planning process in India is a multistage one. It involves many institutions like Planning Commission, National Development Council, Ministries of Centre and State, State planning advisory panel, district planning panel and private sector.
      Despite such a huge planning machinery in India it is still faced with problems of poverty, unemployment and underemployment, inflationary price rise, underutilized manpower and regional inequalities. A lot of these problems are due to many drawbacks of planning process.
      In a Country like India, where majority of wealth is owned by private individuals, planning process fails to incorporate private sector. This is due to the development councils for advice on Industries lack leadership and proper technical support. As a result, there is growing concentration of wealth in few hands and raising inequality.
      Planning Commission lacks trained persons and experienced experts. There is lack of co-ordination between various sectors of economy regarding plan implementation and direaction.
      Also, at implementation level there is lack of urgency, as a result given timelines are not meet and plans run into huge cost overruns. Red-tape is also prevalent.
      Further, there is no proper supervision of implementation of plans and no feedback mechanism to make proper assessment of them. Sometimes, plans have unrealistic targets.
      Planning at district, taluka, block and village level is very poor or absent altogether.
      Only economic planning will in itself will not solve the multidimensional problems faced by India. Structural and Institutional changes have to go hand in hand with Planning process.
      Although Agricultural output is increased, there have been no land reforms. As a result, small and marginal farmers are living life of poverty.
      The planning Commission have not undertaken scientific investment of social relations in rural areas based on kinship, heredity and caste. This will further help planning process in bridging urban-rural divide and financial inclusion in rural areas.
      India has achieved a steady economic growth, rise in education, social sector and infrastructure. There has also been development of IT sector and India is no longer dependent on food imports. All these achievements are result of effective economic planning.
      However, we have to make planning more effective at grass-root levels and enable more participation of people for greater achievements and tackling bigger challenges.(A2)

      • 1) Critically evaluate the process of economic planning in India.
        The process of planning in india was started way back before independence when a civil engineer M. Visvesvaraya came up with a blue print of indian planning but british govt didn’t responded to it. After that numerous plan like congress plan, Bombay plan, gandhian plan, sarvodaya plan followed all with the same major objective which were: poverty alleviation, employment generation, economic growth of the country, improving standard of life, making india self-reliant, checking regional growth, restructuring of agriculture, importance of small cottage industries etc. Planning commission was set up to make policies and review after every five year.
        Govt. was criticised for no evaluation mechanism. After that govt. made the process of computerisation of record faster so that evaluation can be done easily. Govt. also countered the criticism of not setting up of short term goal to back up long term goal by presenting short term goal as well as long term goal through economic survey. Every year govt. publishes economic survey to show the progress of planning and further expectation. There was a long overdue criticism on govt. for neglecting agriculture and giving more focus on industry. Although the criticicm was not completely right as after independence agriculture growth rate was more than 200%-300% than during colonial period. Similarly since india has huge population explosion and population is still rising at alarming rate, there was criticism that enough employment were not generated as industry are capital intensive rather than labour intensive. Govt. is looking to overcome the critic by looking at agriculture sector and trying to bring reform in it so that large employment can be consumed in it. Also they were criticeised for imbalance in regiaonal growth, location of industries , too much centralising and emphasis on PSUs etc.
        However with time, there has been some changes in thinking and now state has been looked as major role player for further planning and connecting with the people. Agriculture became prime motive force in tenth plan and government recognised importance of governance along with setting monitorable targets. Thus , even after a lot of criticism government did not ignored those faults but tried to improve it and alienating the country towards welfare state.

    • NEHA 126

      Ans-Economic Planning is the process policymakers undertake to emsure generation, sharing and consumption of wealth. In India, The Planning Commission, an advisory body, is responsible for the economic planning. Planning in India derives its objectives from Directive Principles Of State Policy.

      Advantages of Economic Planning-:
      * It is only through economic planning that a nation can hope to
      improve the living standards of its people and use its resources to
      optimum capacity.
      *Economic Planning prevents asymmetrical growth to national economy by productive combination of projects and by judicious allocation of available resources.
      *It helps to correct and eliminate regional imbalance.
      *It promotes coordination between different sectors of the
      *It helps the state to remove economic disparities and establish an egalitarian society.
      *It provides the people with best criterion to judge the performance of government in achieving pre-determined targets and rates of growth.
      Objectives of Economc Planning-:
      Planning without objectives is like driving without destination. Economic planning in India aims at following objectives-
      *High rate of growth with high standard of living.
      *Economic self reliance
      *Modernization of the economy.
      *Economic stability.
      Thus we can say that objective of Indian economic plan has been a non inflationary self-reliant growth with social justice.

      Since Independence the planning of economy has helped the country to make some remarkable achievements like-
      *National Income and per capita income has increased manifold in comparision to the period before Independence.
      *Agricultural productivity per hectare and per worker has increased many times and this laid the foundation of Green revolution and other institutional changes in agriculture sector.
      *Industrial production have increased to great extent with huge capital investment through five year plans in this sector.
      *In the era of planning, India has made much progress in the field of science and technology and today India has its own Cryogenic engine with the successful launch of GSLV-D5 on Jan 5, 2014.
      Thus the planning in India has helped it a lot to progress but still a lot to be done like-
      *Enhancing the capacity for growth for more mobilization of investment resources.
      *Eradicating Poverty
      *Enhancing skills and Faster generation of employment.
      *Markets of efficiency and inclusion.
      *Decentralisation and empowerment.
      Hence planning in India since Independence has been going through a roller coaster ride but to make this ride interesting all we need to do is to adopt more inclusive measures and instrument planning with a new approach.

      • NEHA 126

        Please review….

        • Lloyd

          i guess u’ll hve to be more critical of the planning process…..bring out the negatives of the same…i may be wrong

      • Lloyd

        Time and again there have been criticisms for the planning process in India.
        The first one being the lack of perspective in planning. A sound planning process should be evaluation based and long term goals should be followed up by short term ones. However, in the Indian context there is no nodal body for collection of data at national level, the collection process is fraught with delays and speedier data delivery is not possible. Hence, the plans are launched on the basis of projected data rather than the real data. Also due to the lack of political will and inadequate mobilization of resources, it is not possible to set long term goals, and therefore the planning process works on short term goals.
        Economic planning in India has failed to promote a balanced pan-India growth. Few states such as Gujarat, TN and Maharashtra have gained out of it while the BIMARU states are still backward in many aspects such as economic growth, HDI, literacy etc.
        Instead of setting up ‘labour intensive’ industries, planning in India has focused more on setting up ‘capital intensive’ industries specifically from the second plan onwards.
        The planning process in India has been branded as a highly centralized one. Contrary to the National Planning Committees call for ‘democratic planning’ in the country, setting up of institutions such as NDC hasn’t been successful in promoting this idea. Lack of financial autonomy to the local bodies such as panchayats is another point in this regard.
        The excessive emphasis on the welfare of PSUs was also criticized. These industries proved to be inefficient and loss-making for a long period, and also created monopolies in the market thus failing to fill up the demand-supply gap.
        Also for a very long period, developing agriculture was ignored and undue preference was being given to promote loss-making PSUs.
        Indutries which required skilled-workforce were being set up at places where it was highly deficient. Therefore, such places couldn’t reap much advantage from new industries being set up.
        The planning processes was alleged to be highly policitised for serving vested political interests of the Centre which led to the promotion of imbalanced growth.
        A highly complex tax structure, nationalization of banks and undue expenditure done for the sake of the loss making PSUs led to the emergence of tax evasion, lesser and lesser capital for the private sector and the menace of parallel economy in India.
        Oflate the government has started taking steps in the direction of improving the planning process such as prioritizing backward regions as far as directing central funds and investments, developing the agriculture sector, bringing FDI in various sectors and so on, but still there is a very long way to go.

        • grv

          good answer , yo could have mentioned lac of decentralized planning , scenario planning and also little more emphasis on areas of achievment in the final para

    • Adi

      Do being a volunteer makes any difference?? any advantage??? how r they different from others posting without being volunteer??

      • NEHA 126

        There is no difference between a volunteer and non-volunteer…….all are same and there is no any particular advantage to the volunteers… keep writing friend…..its all for our own good….

      • NEHA 126

        And please if you can review my above written answer and tell me my flaws…….that will be a great favour….:)

  • I. Answer all the following questions in about 400 words each:
    2) “The major objectives of planning in India are not only broad but open-ended.” Elaborate

    • JNT

      India’s new identity as a global power has been substantiated by the welfare promoting and inclusion emphasizing objectives enshrined in the various plans and policies of the country. Taking a cue from the soviet union model of national planning the Government of India adopted the practice of planning in the beginning of 19th century as such various were made to formulate plans as well as strategies for planning, the notable ones being the Visvesvaraya plan, the Congress plan, the Peoples plan etc. The reports of the national planning committee setup in 1938 under the Congress plan, the deliberations of the constituent assembly and ultimately the Constitution of India laid the foundation for evaluating the objectives of planning in India encompassing the aspirations of the national movement as well as the future generations. The objectives of planning in India were further cemented once the functions of planning commission were announced in 1950 and further expanded in 2002.
      The cornerstones of planning in India seek to fulfill the Indian idea of becoming a welfare state, promoting co-operative federalism and bringing institutional changes. Also the objectives of planning in India which are not only broad but also open ended have been laid down in the very plans formulated in the yester years. The main objectives of planning in India turn out to be:
      1. Achieving a sustained increase in the levels of production i.e,ECONOMIC GROWTH
      3. EMPLOYMENT GENERATION, which also supports poverty alleviation
      4. CONTROLLING ECONOMIC INEQUALITIES which were very apparent in the newly independent India.
      5. Achieving SELF RELIANCE in ever field of economy as well as serving the realities of higher inter-dependence in the globalizing world post WTO.
      6. MODERNIZING the traditional economy.

      Apart from this protection o environment, achieving sustainable development containing population growth and social justice are some of the ancillary objectives of economic planning in India.

      Thus it is evident that through an increasingly indicative nature of economic plans (five year plans, 20 point programs, MPLADS) and decentralized planning .the Indian state covers a entire range of administration from all the spheres of economy (excluding defense and foreign affairs) which hardly require any change or modification with the changing times. Moreover, the objectives for a subsequent plan or automatically set after the completion of one plan. Thus, it can be concluded that process of economic planning in India has evolved to a major tool of governance in the country and has been on the focus of leaders of the country.

  • II. Answer all the following questions in about 200 words each: 6 x 10 = 60

    1) Highlight the importance of savings and investments in domestic resource mobilization.

    • Mendax

      Saving can be defined as excess of income flows over consumption flows.It can be increased either through increasing income level or through reduction on consumption expenditure. On the other hand investment is the expenditure on the acquisition of production capacity. Investment is funded through savings.
      Investment and saving are related by virtuous cycle in which high investment led to high production capacity which results in higher income level which cause increase in savings. Domestic resource mobilization refers to maximum utilization of resources which assist ineconmic development of any country.When saving is used in investment like purchasing tools, machines, building roads, factories etc. it advances economic prosperity through technological improvement, productivity improvement, higher utilization efficiency and increasing access to financial services.
      Financial institution like banks, insurance companies or microfinance institution facilitate savings whereas investment is perpetuated by increase in domestic savings, reduction in non- development expenditure, liberal policy and increase in productivity standards and also requires addressing various infrastructure bottlenecks

  • 2) The Tenth Five year plan clearly accepted the ‘agriculture sector,’ hitherto neglected in previous plans, as the Prime Moving Force of the Indian economy. What were its key suggestions for this sector and how did it highlight the importance of agriculture? Explain.

    • Sanjhi

      The 10th FYP highlighted the importance of agriculture to Indian economy in the following manner:-

      Agriculture contributes 14% to our GDP but about 58% of population is dependent on agriculture for survival, thus focus on agriculture essential for inclusive growth
      In order to achieve food security, increasing agricultural production is a must
      There is an urgent need to address ecological concerns related to the agriculture sector such as land and water management.

      With respect to the above concerns, the following suggestions were made in the 10th FYP:

      transfer land to landless farmers
      permit leasing of land
      utilize wasteland by parceling it out to landless laborers, SC/ST farmers, etc.
      use degraded wasteland for agro forestry
      encourage crop diversification with focus on cereal production
      encourage organic farming
      encourage cultivation of fruits, flowers, vegetables through horticulture
      introduce water management practices for sustainable agriculture such as rain water harvesting, micro irrigation, drip irrigation, etc.

      • agriculture was recognised as PMF in tenth plan itself shows the importance of agriculture in the country. 67% of the people are dependent on agriculture in the country and is one of the major contributor of india’s GDP. Agriculture not only provides food security but also consumes lot of population in employment sector thus reducing the burden on govt. shoulder to generate more employment.Following reforms were proposed in tenth plan regarding the agriculture
        1. Elimination of inter-state barriers of trade and commerce
        2. Permitting land leasing and encouraging contract farming
        3. need to amend the essential commodity act.
        4.replacement of various acts concerning food with one comprehensive food act.
        5. permitting future trading in all commodities.
        The tenth plan thus tried to remove all the barriers in agriculture and suggested reforms such that productivity of crops can be increased along with increase in income of farmers. It also focussed on liberalising the agriculture with the larger goal of food security in the country.

  • 3) What do you understand by multi-level planning? Evaluate its performance.

    • Multilevel planning, as the name implies , is a form of planning where the whole plan is carried out in a multi-level process. In india ,the task of plan formulation is basically carried out by the central & state govts.
      The various levels of planningin india are central ,state ,district,block ,villages with the centre having a dominant role in planning & the states practically depends on centre for financial & other resources , the centre more or less, is at the helm of things. Nevertheless, the level are grouped in 5 categories :
      1.National level – sectored cum inter state /inter-regional planning :
      2.State level -sectored cum inter district /inter-regional planning.
      3.District /metropolital level -Regional planning.
      4.Block level-Area planning.
      5.Panchayat level – Village planning.
      In such plans there is direct participation of the people in the planning process. Here passing through various stages the objective of the national planning reach the Grass-root-level.
      Here every region/unit big or small,constitutes a system and planning process becomes more effective.
      In a large country like India containing physical,cultural,economic and social diversities multi planning is playing a vital role in economic and social transformation .Its inherent advantages include optimum utilization of local level resourses ,satisfactory solution of regional and local problems ,removal of socio-economic disparities and development of socio-economic institutions which could play positive role in developmemt process of a developing country, like India .

    • Multi level planning is planning at different stages of the polity like at center,state,district,block and village/panchayat levels.This concept emerged in early 1980’s with a view of ensuring ‘democratic participation’ at planning level.That is it aims to ’empathize’ the lower levels of polity and plan formulation has to have representation of everybody in the country. However it failed largely in its objective.

      Central planning has 5 year plans,20 point program,MPlads and machinery planning commission,different ministries participation in plan layout.States 5 year plans will be parallel to centers with respective planning machinery.NDC acts as an integrating body to promote common economic programmes. From 1960’s District level has dist.plng.boards with DM as defacto chairman.Implemented in urban areas via minicipalities & corporations,in rula level via blocks & panchayats.Block level is a part of district level and had it as nodal agency.From 1980 village level planning with district & block planning boards as nodal agencies has developed 3 variants of planning due to socio-economic differenences.They are village,hill area & tribal area planning.

      However,center remained a dominant force in plan formulation with necessary resources at its disposal.states have their plans but need to depend on center heavily for resource allocation.They largely implement center sponsored developmental programs.The other lever come into picture only at the implementation level.Necessary funds,functions and functionaries are not & states show valid reasons like factionism,elite power capture,no necessacary expertise etc.,

      In all the spirit of multilevel planning that is ensuring ‘democratic participation’ at planning level is not adhered to and central government has to take proactive steps in the best of nations interest.

    • Sanjhi

      Multi-level planning refers to the process of planning carried on at different levels of the government. The following are the various levels:
      – Central level
      – State level
      – District level
      – Block level
      – Panchayat level further divided into village level, tribal area level, hill area level

      MLP did not succeed in any measure in early years. This was because there was lack of people’s participation in the planning process as local-level institutions did not have any political significance in the power hierarchy and was starved of funds because of unfavorable attitude of states towards devolution of planning. Often, states also did not have sufficient finances and thus only central plans were implemented.

      With 73rd and 74th Constitutional amendment, local bodies now have a constitutional status and are in a better position to implement MLP. But their financial condition is still not healthy as highlighted by various Finance Commissions. The 13th Finance Commission has proposed certain concrete measures in this regard. There is also an urgent need to not only involve the civil society at all levels in the planning process but also set up a mechanism for coordination between different levels of planning to make the MLP process effective.

      • multi- level planning is the process in which planning is done at different level like central level, state level, district level, block level and panchayat level. the main aim of this planning was to include local people in planning process and formulating their demand thorugh trickle up process i.e. panchayat would make the plan for their area and then it will hand it over to block level committess. block will analyse and further pass to district and it will go on till it reaches centre. however it failed due to some reasons:
        1. every region had different agenda and due to lack of co-ordination among them it was difficult to arrive at a consensus and make cohesive plan.
        2. state and local bodies lacked the financial resources to formulate its plan. it was a big setback in process of decentralisation. however 73rd and 74th amendment tries to overcome the issue of local bodies but still funds were limited.

        thus there is need of major reforms in fund allottment scheme and better co-ordination among the different level to make MLP more successful.

        • Lloyd

          Multi-level planning is promoting planning from the Centre to the lowest levels of the administrative set strata. These strata include:
          • The Centre Level Planning
          • The state level planning
          • The district level planning
          • The block level planning
          • The local level planning
          The process of transition from a single level to a multi level planning set up was a gradual one filled with some amount of reluctance among the political class and bureaurcracy. MLP was started to achieve the goal of democratic planning with guaranteed participation of people in the process of planning, thereby decentralizing the process. However it failed to achieve the set objectives. This had a few reasons. The MLP process failed to promote people’s participation in the formation of various plans. The idea of integrating plans from all levels of the hierarchy starting form the local level to the centre wasn’t implemented successfully, as each level prepared its own plans lacking the empathy factor. The lack of financial support to the plans of individual states led to the successful implementation of only the Central plan in the states rather than the former being implemented in a more effective manner. Before the introduction of the 73rd and 74th amendments, the local bodies in India did not have any constitutional status, hence no financial autonomy and therefore failing to execute their plans.

  • 4) What is a resource? Throw light on the various resources available for financing the plans in India.

    • Everything available in our environment, which can be used to satisfy our needs, provided it is technologically accessible, economically feasible and culturally acceptable, can be termed as a resource.

      Plan financing refers to the sources, methods and policies of the government in regard to financial resources for planned development of the country. The two major sources available for financing the plans are domestic and external resources.

      Domestic resources are further classified into Public savings, domestic borrowing and deficit financing. Public savings consist of Balance from Current Revenue, Surplus of Public Enterprises and Additional Resource Mobilization. Domestic borrowing consists of Loans from Public or Market borrowings, Small savings and Provident Fund and related components. Deficit financing is the financing of budgetary deficit through public loans or minting new money.

      External resources consist of 7 major components such as balance of trade with regard to goods; balance of trade with regard to trade in invisibles on the current account; transactions on capital account; bilateral and multilateral capital flows; revenues raised in capital markets abroad; FDI in productive sectors and portfolio investment in domestic capital markets.

  • 5) What is deficit financing? What is its effect on the economy?

    • Adi

      The process of financing a Deficit Budget is called Deficit Budgeting, i.e. government while presenting a budget deliberately proposes for higher expenditure than the receipt/ revenue expected. Thus government prepares itself in advance for the burden of extra expenditure and formulates its future policies to sustain the deficit. The deficit is then sufficed either by taking loans or foreign financial aids; using cash reserves from RBI or issuing new currencies by government.

      The deficit budgeting is usually done to spur the economy either by reducing taxes (which reduces the revenue earned) or by increasing government investment to various development activities. This in turn leads to better purchasing power of people (due to reduced taxes), increases demand, which increases output, and thus resulting in increased hiring and hence helping to launch chain of events that enhance economic condition. This economic chain has to be monitored closely so as that it yield profits in long run. Thus deficit financing is tool used by nations reeling under recession, or facing natural calamities or wars, granting subsidies/poverty elevation scheme, to overcome losses of PSEs.
      Deficit Financing is one of the important economic features of Developing countries like India, to finance its various development plans. However, if Developed nation follows Deficit Financing, its governance is considered inefficient.

      Deficit Financing, if let uncontrolled, may lead to inflation, increased cost of goods and services and distorted investment. This would result in reduced exports, increased economic inequality, and increased Deficit (BOP). Thus the very reason of introducing the Deficit Financing would be defeated. Therefore, close monitoring and repeated evaluation becomes necessary.

      Friends, pl. evaluate.

      • nicely written…temme the source…

        • Deficit financing occurs when government spends more than its earning, that is expenditure is more than the revenue.It has both positive and negative effects on economy of a country.

          It is needed for a developing country like India where financing for different ‘welfare’ programs aimed to uplift masses are beyond its fiscal capacity.Financing is done by reserve bank currency printing and foreign currency reserves. The positive effects are it increases money in hands of people which leads to spending and result in better standards of living and growth of economy.It is resorted at the times of economic recession or slowdown to recover economy from slump.If spent on infrastructure building creates durable assets and lead to long term returns.

          But the negative effects appear when it is spent beyond a target and time limit.Firstly,result in inflation as high incomes leading to better consumption and demand,resulting in price rise.people with fixed incomes suffer as their real incomes erode.Secondly,lead to low savings and investment,since money spent on consumption.Thirdly,rather than spending on durable assets people indulge on speculative practices.Fourthly different international rating institutes derate a country which hampers offshore credit availability,affect business as foreigners deter to invest.Fifthly,affects balance of payments as increased imports cost dear and exports decreases since become costly due to prise rise.
          Lastly it increases Inequality,rich become richer and poor remain poor.

          Rbi & Government also are concerned by growing fiscal deficit and taking measures to contain within target of 4.8% like social sector spending cut, phasing out unwanted subsidies,investment promotion etc.,

          Thus though deficit financing is desirable for a developing country to achieve higher growth rates & development,in long run it needs to be contained to make economy sustainable.

        • Adi

          thanks Rohit.
          no particular source. any economic book would have this topic 🙂

      • vivek jasele

        sir pls help us to know the sources which required to wright well answere?

  • 6) What are the sources of revenue for Panchayat Raj Institutions in India? How do they manage to mobilize resources to carry on developmental works?

    • As we are following 3 tier system in our country ,except in some states like goa, mizoram ,j&k etc . Different revenue sources are there for them:
      1. VILLAGE LEVEL ( or gram panchayat): Fund has been created on the pattern of consolidated fund of state .All money recieved like contribution or grants made by the state govt. ,Zila parishad and all sums received by the panchayat in the form of taxes ,rates,duties,fees,loans,fines & penalties,compensation,sale proceed and income from panchayat property etc. go in that fund.
      -Village panchayat have been empowered to levy taxes or fees on subjects like houses & buildings,professions,trades,fairs&melas,sanitary arrangement,water tax,lighting tax,slaughter houses etc.
      2. BLOCK LEVEL (or panchayat samiti): All state legislations provide for the creation of panchayat samiti fund like the consolidated fund of state. All money collected by the samiti goes into that fund. These are grants given by state govt. or union govt. ,donation received, income from properties owned by samiti ,any share of land revenue/taxes levied by state govt. and assigned to the samiti,part of the income of zila parishad assigned to it ,all loans raised by samiti etc .
      3. DISTRICT LEVEL (or Zila parishad):
      a. Grant-in-aid given by state govt. & Union govt.
      b. Donations & incomes of the properties of parishad.
      c. Toll,fees or cess imposed on bridges ,ferries,entertainment,fairs,haats etc.
      d.Share of land revenue assinged to it.
      e. Loans raised by it againest the security of its properties.
      f. Contributions by panchayat samiti or any local authority.

      -Some functions are assigned to all of them to mobilize these funds for the developmental works like Gram panchayats have mandatory and discretionary functions.
      -Panchayat samiti supervies the work of panchayats and scrutinizes their budgets ,and charged with responsibilty of implementing plans for agriculture,animal husbandary,fishries,rural health etc.
      And zila parishad is also responsible for maintenance of primary and secondary schools,hospitals,dispensaries,minor irrigation works etc.

    • Sanjhi

      Panchayat Raj Institutions have two major sources of revenue: funds they receive from respective states and funds they generate themselves.

      Funds from states are governed by the Constitutional scheme in which Finance Commissions at the Central and State level recommend transfer of funds to PRIs. For instance, the 13th Finance Commission recommends that about 1.2% of previous year’s tax revenues of the state be given to PRIs as grant-in-aid. Further, 2.2% of the divisible tax revenue be given as funds depending upon the performance of PRIs.

      PRIs, particularly Gram Panchayats are empowered to carry on different activities in different states from which they can raise revenue to carry on their developmental work. The case study of Odisha may be considered. Gram Panchayats in Odisha raise funds through the following activities:
      – levy of various taxes for example water rate, lighting rate, etc.
      – levy of various fees such as for protecting crops from grazing cattle, use of slaughterhouses established by Panchayats
      – fees through issue of various licenses such as for carrying on any trade activity in the village.

      Thus, PRIs raise revenue both at the local and the state level.

      • Sumit09b

        Facts made your answer perfect!

      • vijay

        good answer for the first part, but 2nd part of the question is missing……

  • 1) Highlight the importance of savings and investments in domestic resource mobilization.

    Inclusive growth is one of the ideals that is inherent in the Directive Principles of State policy of our Constitution. Socio Economic equality can only be brought about when every section of the society takes part in the march of advancement and none is left behind. To achive these ideals, the country needs to mobilise all its resources to exploit the maximum gains out of them. This can be achived by having a proper channel for organised saving and investment by the citizens. Banking needs to taken to door steps of everyone in every nook and corner of the country so that the money that the people hold can be brought in to economy and can be used as a growth driver. The people should be motivated to invest their money in the areas which can take the country forward.
    Poeple need to explained that how the value of their money deteriorates with time due to inflation and how they can use the Banking system to their benefit. Their savings can also be channelised to safer channels like Post office or National saving certificates. This will again serve the dual purpose of keeping the money safe, saving it from inflation losses and fueling country’s growth requirement.

  • 5)     What is deficit financing? What is its effect on the economy?

    Deficit financing is the economic method to finance the country’s expenditure, when its revenues are less than its expenditure. When a country plans to undertake development or other activities which can not be fully financced from the revenues then it resorts to Deficit financing. It can be achived by the way of foreign aid, using foreign exchange reserves, issuing government bonds or printing money, which is normally used as a last resort. This method of financing the expenditure can be efficiently used to undertake infrastructure projects which cannot be pursued under normal revenues of the country. This comes as an effective tool for the developing countries which can use it with astute fiscal management to achive social and infrastructural growth.
    Though deficit financing is a widely used tool in the world economy, it does present certain draconian problems which can engulf the economy of the country if not handled prudently. Deficit finacing leads to the increase of money supply in the economy which leads to inflationary pressure. The money held with the people tends to lose its value as the commodities get dearer and hence there is loss to savings. Due to fall in vaue of currency the imports become expensive and lead to erosion of foreign exchange. This may lead to a Balance of payment crisis situation.

  • 5) What is deficit financing? What is its effect on the economy?

    Deficit financing is the economic method to finance the country’s expenditure, when its revenues are less than its expenditure. When a country plans to undertake development or other activities which can not be fully financced from the revenues then it resorts to Deficit financing. It can be achived by the way of foreign aid, using foreign exchange reserves, issuing government bonds or printing money, which is normally used as a last resort. This method of financing the expenditure can be efficiently used to undertake infrastructure projects which cannot be pursued under normal revenues of the country. This comes as an effective tool for the developing countries which can use it with astute fiscal management to achive social and infrastructural growth.
    Though deficit financing is a widely used tool in the world economy, it does present certain draconian problems which can engulf the economy of the country if not handled prudently. Deficit finacing leads to the increase of money supply in the economy which leads to inflationary pressure. The money held with the people tends to lose its value as the commodities get dearer and hence there is loss to savings. Due to fall in vaue of currency the imports become expensive and lead to erosion of foreign exchange. This may lead to a Balance of payment crisis situation.

  • vijay

    What are the sources of revenue for Panchayat Raj Institutions in India? How do they manage to mobilize resources to carry on developmental works?

    Economic reforms and local government empowerment are the two great initiatives launched in the 1990’s. Panchayat Raj institutions introduced in India through 73rd Amendment with the objectives of improving delivery mechanism of public utilities and civic services and encouraging participative governance.

    To carry out wide range of developmental works PRI’s uses two types of resources- loans/grants from State/Union govts and their own resources.
    loans/grants from state and union govts includes programme-specific allocation under Centrally Sponsored Schemes such as JNNURM, MP and MLA Local Area Development Funds;
    Internal resource generation (tax and non-tax revenues) – tax on property, profession, non-agriculture land, registration of vehicles; services like entertainment, markets, water, sanitation, lighting; cess on stamp duty, land, education.

    As per 13th Finance Commission, there are four major aspects of resource mobilisation
    (i) potential for taxation
    (ii) fixation of realistic tax rates
    (iii) widening of tax base and
    (iv) Improved collection.

    Analyzation of potential taxation sources- property and services involves people in the affairs of an elected body and makes accountable to its citizens.

    Widening of tax base involves exploring additional sources of revenue through innovative tax/non-tax measures e.g. fee on tourist vehicles, special amenities, agro-forestry, restaurant, theatre, cyber café etc.

    Improved tax collection by proper planning, monitoring, and assigning works ensures better service delivery also propel Panchayats to make some profit and generate additional revenue for themselves.

    PPP’s is a popular mode of resource mobilisation. Local information and resource centres (Common Service Centre) through the use of ICT utilize the potential of educated local youths in documenting and mapping local resources.

    Democratic governance and citizen sovereignty are the bedrock of our Constitution. Such a people-centred governance process enhances participation and greater effectiveness in delivery of services. The increased revenue generation and proper utilization by mobilizing resources realizes the reason behind establishment of PRI’s.

    source: 6th chapter of 2nd ARC report
    plz review
    thanx and regards

    • I don’t think that JNNURM fund is given to the Panchayat, it is for urban areas.. Correct me if I m wrong..

      • vijay

        YES its given to urban local bodies…..urban local bodies also comes under panchayat raj institutions…..its the only central scheme which directly gives funds to ULB’s without interference of states

        • IAS


          The question talks abt the PRIs (established per 73rd amend.)
          PRI=73rd and ULB is a seperate concept alltogether..
          ULB=74th.. so ULBS are outside PRIs.
          Please correct me if understanding is wrong.

  • 1) Critically evaluate the process of economic planning in India.


    India adopted the five year planning scheme after getting its independence. The first five year plan was aimed and removing poverty, Second followed the Mahalanobis model and the plan assumed a closed economy. The aim was to determine the optimal allocation between the productive sectors to achieve maximum growth. The Third plan focused on improving agricultural productivity and making India self-sustained in food. Similarly, the subsequent plans tried to aim at developing India in a piecemeal fashion. After the end of cold-war, Indian economy became more and more liberalised and with the adoption of New Economic Policy in early 1990s, the licence raj was dismantled.

    The Indian Constitution provides for three lists: Union, State and Concurrent. Accordingly the Central and State governments enjoy rights to legislate on various subjects. But India is a Union of States and unlike US, the States in India co-ordinate with the central government to prepare a National plan.

    The planning process starts with the Planning Commission preparing a plan, which gets then approved by the Cabinet, then the CMs and representatives of all the States and Union Territories of India meet as a part of NDC, which is chaired by the PM. Once the plan is approved the Ministries align their future planning in accordance with the plan. Planning is intertwined with Budget, which is prepared by the Ministry of Finance and approved by the Parliament annually.

    Post Independence, the India National Congress remained in power in several States and Centre for several terms. In such a scenario, planning was done in a top down manner. The Centre made and plans and the States accepted. In the present days of coalition polity in India, many a times States complain of not getting enough time during the NDC meets to present their concerns and demands. Also, parties getting mere 23-25% of valid votes during elections become the single largest party during assembly elections. Thus, the majority party might not be representing the majority of Indians.
    After 73rd and 74th Constitution Amendments, a third layer of administration was added. The Panchayats and Municipal co-operations also prepare their plans and co-ordinate with the other two layers in the process. This is in accordance with the Directive Principle of State policy that directs the State to incorporate villages and wards in legislative process. But in absence of funds, functions and functionaries many a times this last layer is not able to perform meaningful role in the process of development. To address this, more devolution of funds and powers need to be done
    Overall, planning in India has been successful in a respect that despite the weak financial condition at the eve of independence, India has been able to grow steadily and is currently the second fastest growing economy in the world. Poverty has been declining, the health indicators are improving, literacy rate has gone up, life expectancy is more than ever before, India is widely considered as a growing power in the region and the world. India did not face a single famine post independence, India eradicated polio in 2011, today India is a nuclear power, and has achieved great heights in the fields of IT, medicine and space.
    Considering all the above point, it can be said that the decision of going for five year plans has paid off. But in the changing global and internal dynamics it is time to make positive changes in the planning process so as to give the States a greater say during planning so that political considerations do not affect planning. Also, there is a need of strengthening the Panchayats and Municipal corporations so that a national plan can become truly national

  • Ravi Kumar

    Hii Insight ..
    Sir Please Give Some Light On This Question “The major objectives of planning in India are not only broad but open-ended. Elaborate .. Don’t Know Which Topic Are Used Or Include In This Question .. !

    • Lloyd

      The six major objectives of planning in India include:
      • Economic growth
      • Poverty alleviation
      • Employment generation
      • Controlling economic inequality
      • Self reliance
      • Modernization
      Few of the above listed objectives like poverty alleviation and controlling economic inequality were decided and are being pursued since the very first Five Year Plan of India. There have been hardly any changes and modifications in them with the changing times. However, governments down the line have introduced several innovative policies, schemes and programmes to tackle the above mentioned problems. These include poverty alleviation and employment generation scheme MGNREGA. The National Science and Technology Policy 2013 to make progress in the field of science and technology is another example. The objectives of planning are broad in the sense that they have given equal wieghtage to all the aspirations of the Preamble, the DPSP, the Fundamental Duties and the Fundamental Rights. They also encompass the aspirations of the nationalists and freedom fighters. Also the entire sphere of administration excluding defence and foreign affairs are included in them. However, none of the above mentioned objectives have been completely achieved due to various reasons such as lack of resources, political will and so on.
      Therefore the statement holds good.

      • Lloyd

        frnds please review this answer

  • ashish

    Critically evaluate the process of economic planning in India.
    The planning has been fraught with major deficiencies since its inception. Some of the criticisms are:
    1. Lack of Perspective: There has been lack of evaluation of previous plans and following up of long term goals. This was mainly due to lack of access and complete data collection owing to federal polity and imperfections. The First Plan had set long term goals for 20 yers but over the time, falling confidence in mobilising the required resources and political uncertainities at the centre made it convention to set only short term targets. This shortcoming has been done away with 10th plan .
    2. Imbalanced growth and development: The planning process has been allocating the funds on sectoral bases but failed due to corruption and political reasons. Now to promote balanced growth, the govt has adopted the new strategy to allocate funds based on differential need among states. The Centre is also promoting the states with lower infrastructure for private investment.
    3. Highly Centralised nature of Planning: since the First Plan despite setting up NDC and multi level planning. 72nd and 73rd Amendments promoted the cause of decentralised planning by delegating the constitutional powers to the local bodies. But there is still lack of financial provisions for them which needs to be evolved . THE Centre is supporting the states in their development as recognised after 10 th plan and in return , the states should demonstrate transparency and fiscal compliance.
    4. Lop sided employment strategy: The planning failed to generate employment due o focus on capital intensive industries . After economic reforms, the focus shifted to agri-industries and self employment instead of wage employment.
    5. Excessive emphasis on PSUs: The loss making PSUs were supported for a long period and there came a demand supply gap in the major goods and services produced by the PSUs. Several market reforms and entry of private sector has changed the situation but still more liberal approach needs to be evolved in PPP relations.
    6. Agri overshadowed by industry: created food insecurity situation and lower purchasing power for the masses. Still laggard agri sector needs special care as industrial growth is dependent on agri growth.
    7. Wrong financial strategy: The govt failed to mobilise resources for highly capital intensive plans. Expanding subsidies, salaries and the interest burden pushed up the non plan exp. Leadin to scarcity of funds to support the plan exp.



  • Raj

    Question: What is Resource, Throw light on Various resources available for financing the plans in India

    Resource is broadly defined as a source or supply from which benefit is derived. Resources are classified broadly into biological, economical and computer based on the type of source or the benefit it provides. Economical resources are Land, Labour and Capital, which help in providing a good stable economy.

    Resource for Financing plans:
    A: Direct : Govt get the money directly to invest in its plans
    A1. Tax: Direct, Indirect taxes on the people help financing. Broaden the Tax base and having clear rules and guidelines for Tax
    A2. Disinvestment: PSU disinvestment. Helps by handing over sick PSUs to private for better administration and also provides capital for retrieval PSU which are capital crunchy
    A3: World bank aids/loans: World bank or other countries provides loans or aids to India on the basis of selective development works which is of certain interest to India and the world bank in improving the livelihood.
    B:Indirect: Govt by its policies attracts others to invest money in its plans of development
    B1. Private Savings: Savings from the common people in special bills or infrastructure bonds would help collecting capital, thereby the govt need not provide money. The govt bills and bonds are lucrative due to its secured nature.
    B2. PPP: In BOT, only an initial small amount of money is spent by the govt in obtaining the land area. The investment is made by the private company and later retrieved by them from the public. Govt acts only as a regulator to see to it that its objective of development is met.
    B3: Infrastructure Bonds: Providing Tax free Infra bonds and similar methods, govt can raise money for specific infra projects. Govt issues these kind of high secure and good intrest rate bonds to attract the public savings in investments of development nature for which the govt need not spend the capital from its exchequer directly
    B4: FDI: FDI in sectors like tourism, retail, infra etc., would bring in the advanced tech of the west along with money for implementation. This would also provide employment. The govt can also gain by the economic growth due to the investments by foreign company in India. For Ex: Multi Brand retail would bring in better tech for warehousing, cold storage and transport.

    These are the different resources for financing the plans in India

  • Henderson Brooks Report was the top secret report on 1962 Indo-China war.
    Major conclusions are:
    * India’s army as well as top officials were not expectant of this scale of massive war by China as they were considering them only minor skirmishes and limited efforts
    * There was no preparation as well as strategy to deal with the war.

    Forward policy was a political initiative to strengthen India’s territorial claims whereas forward policy for China was different where they were advancing towards unoccupied areas.
    Situation was more intensified after escape of Dalai Lama to India,Tibet revolt etc and China stated trespassing towards to eastern as well western sectors to India.
    Probing missions were all very poor and posts were isolated as well as indefensible. There were no men as well as material to deal with war.
    Chinese as well as Indian perceptions on the issue is different .
    Escape of Dalai Lama, granting refuge to refugees and various statements issue by India was misinterpreted and taken as a threat by China that their control over Tibet was undermined by India.The problem with respect to China and Mao was Tibet and not the boundary issue.

    Major conclusion is the key role played by Mao in war. He wanted to regain his control after the failure of Great leap forward and three years of economic distress. He was personally issuing directions to military and the decision of going for war was totally his.

    The war was taken only after consideration of all the major events which were taking place at that time.For China there was only fear from US and Russia and this fear was laid to rest when Chinese ambassador was assured from America of no intention to support taiwanese offensive measures against china and Russia was already caught in looming cuban crisis where it was supported by China.

    According to India the withdrawal of Chinese from border was due to the coming winters and were supposed to come back in summer but it was not so according to Mao who has already pre decided to withdraw after delivering knockout blow to Indians. Acc to Chinese the objective of war was not territorial and it only wanted to forestall any threat to Chinese consolidation in Tibet and wanted India to bring to negotiating table