Topic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
3. The pandemic has worsened the fiscal positions of State governments. Critically analyse the performance of Fiscal Responsibility and Budget Management Act (FRBMA), 2003 in ensuring that debt targets of states remain under sustainable levels. What changes do you suggest in this regard? (250 words)
Difficulty level: Tough
Reference: The Hindu , Insights on India
Why the question:
A decline in revenue and an increase in spending has led to a sharp rise in debt among States with a higher dependence on Central transfers
Key Demand of the question:
To write about the increasing fiscal deficit of the state, its impact and performance of FRMBA in this regard and changes needed to it.
Directive word:
Critically analyze – When asked to analyse, you must examine methodically the structure or nature of the topic by separating it into component parts and present them in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a balanced judgment on the topic.
Structure of the answer:
Introduction:
Begin by writing about the aims and objectives of FRBMA.
Body:
First, write about the impact of the pandemic on fiscal discipline of the states and the impact of a growing deficit.
Next, write about the performance of FRBMA since its inception especially during phases of low economic growth and volatility in global economy. Mention the pros and cons of its performance. Also, mention the various changes made to the act.
Next, write about the changes needed to the act as India recovers from the impact of the pandemic.
Conclusion:
Conclude with a way forward.
