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What is fiscal consolidation? What steps has the government taken in recent times in India to practice it? Discuss.

Topic : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

4. What is fiscal consolidation? What steps has the government taken in recent times in India to practice it? Discuss. (250 words)

Reference: India Times 

Why the question:

The question is amidst the recent efforts by the government that are being made to ensure fiscal consolidation under the current challenging circumstances.

Key Demand of the question:

Explain the concept of Fiscal consolidation and discuss the steps that the government has taken in recent times in to practice it.

Directive:

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction:

Define the concept of Fiscal Consolidation.

Body:

Fiscal consolidation is the policy of making sure that govt keeps its receipts aligned with its expenditure and keeps overall deficit in control.

Discuss the importance of fiscal consolidation through the past experiences in the country.

Explain that with FRBM Act, the government has initiated an institutional mechanism of implementing fiscal consolidation. Elaborate on other measures or steps taken by the government in this direction like reducing fiscal deficit to less than 3.5% of GDP, keeping debt to GDP ratio around 60% and others.

Discuss apart from these what areas can be focused varying from GST reforms to administrative reforms to control wasteful expenditure.

Conclusion:

Conclude that all of these will help in better channelization of resources that India has and it will solve the issues of development, poverty alleviation, and reduction in inequality with more healthy results than current policy regime.