{"id":284208,"date":"2024-02-23T18:29:12","date_gmt":"2024-02-23T12:59:12","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=284208"},"modified":"2024-02-23T18:29:12","modified_gmt":"2024-02-23T12:59:12","slug":"rbi-research-about-economic-growth-and-fiscal-consolidation-recalibrating-spend","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/rbi-research-about-economic-growth-and-fiscal-consolidation-recalibrating-spend\/","title":{"rendered":"RBI research about economic growth and fiscal consolidation-Recalibrating spend"},"content":{"rendered":"

Source<\/strong>: The post implication of recent Supreme Court decision has been created, based on the article \u201cRecalibrating spend: RBI paper redefines the capex-revenue debate<\/strong>\u201d published in \u201cBusiness standard<\/strong>\u201d on 23rd February 2024.<\/p>\n

UPSC Syllabus Topic:<\/strong> GS Paper 3- Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.<\/p>\n

News<\/strong>: The article discusses how the Indian government’s budget focuses on reducing debt and improving spending on long-term growth areas like technology, health, and education. It highlights RBI research on how this approach can lead to economic growth despite short-term challenges.<\/p>\n

What are the government’s plans for fiscal deficit and borrowing? <\/strong><\/h2>\n

Fiscal Deficit Goal:<\/strong> The government intends to bring the gross fiscal deficit down to 5.1% of GDP for FY25, a consolidation from the previous fiscal year.<\/p>\n

Limiting Foreign Borrowing:<\/strong> Emphasis is on reducing reliance on external borrowing, focusing on domestic fiscal management.<\/p>\n

Increase in Tax-GDP Ratio:<\/strong> There’s been a rise in the tax-GDP ratio, from 10.1% in FY14 to 11.7% in FY25, reflecting improved tax revenue efficiency.<\/strong><\/p>\n

Prioritizing Capital Expenditure: <\/strong>The government is shifting its spending towards capital expenditure over routine revenue expenses, indicating a focus on long-term infrastructural investments.<\/p>\n

Developmental Expenditure (DE):<\/strong> A broader approach to capital expenditure is proposed, with DE including allocations for health, education, and digitization, expected to be around 4.2% of GDP in FY25.<\/p>\n

What does RBI research say about economic growth and fiscal consolidation?<\/strong><\/h2>\n

Linking Fiscal Consolidation and Growth:<\/strong> The Reserve Bank of India’s research explores how fiscal consolidation can positively impact economic growth.<\/p>\n

Redefinition of Capex:<\/strong> The paper suggests a broader approach to capital expenditure by considering developmental expenditure (DE)<\/strong>, which includes spending on health, education, skilling, digitisation, and climate-risk mitigation.<\/p>\n

Growth Impact of DE:<\/strong> A 1% increase in real DE is expected to produce a cumulative 5% rise in GDP over four years.<\/p>\n

Employment and Productivity:<\/strong> Increasing employment by 5% in high labor productivity sectors, like chemicals, financial services, and transport, could add more than 1 percentage point to GDP growth between 2024 and 2031.<\/p>\n

Digitisation and Energy Efficiency:<\/strong> The research highlights that digitisation and reduced energy intensity can enhance growth by improving labor and capital technology.<\/p>\n

Balancing Short-term and Long-term Effects:<\/strong> The study acknowledges short-term pains, like a sharp rise in debt-GDP ratio, but emphasizes that long-run gains outweigh these costs.<\/p>\n

Way forward <\/strong><\/h2>\n

Moving forward, the government should continue focusing on developmental expenditure in areas like health, education, and digitisation. This approach, as RBI research shows, can lead to a significant GDP increase. Investing in high-productivity sectors and enhancing labor skills are essential for sustainable economic growth and long-term fiscal health.<\/p>\n

Question for practice:<\/strong><\/p>\n

Evaluate the effectiveness of the Indian government’s approach to fiscal deficit reduction and increased developmental expenditure in fostering long-term economic growth, referencing the findings from the RBI research.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post implication of recent Supreme Court decision has been created, based on the article \u201cRecalibrating spend: RBI paper redefines the capex-revenue debate\u201d published in \u201cBusiness standard\u201d on 23rd February 2024. UPSC Syllabus Topic: GS Paper 3- Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment. News: The article… Continue reading RBI research about economic growth and fiscal consolidation-Recalibrating spend<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216,8184],"class_list":["post-284208","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","tag-indian-economy","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/284208","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=284208"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/284208\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=284208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=284208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=284208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}