{"id":71003,"date":"2020-11-26T17:31:15","date_gmt":"2020-11-26T12:01:15","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=71003"},"modified":"2021-05-10T16:24:28","modified_gmt":"2021-05-10T10:54:28","slug":"present-state-of-economy","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/present-state-of-economy\/","title":{"rendered":"Present State of economy"},"content":{"rendered":"<p><strong>Context<\/strong>: The pandemic has delivered a \u201cscissor cut\u201d to the government finances.<\/p>\n<p><strong>What is the current scenario?<\/strong><\/p>\n<ul>\n<li>Economic output and government revenues are shrinking.<\/li>\n<li>The government has to spend more to safeguard lives and livelihoods.<\/li>\n<li>Widening deficit.<\/li>\n<li>Most of state\u2019s revenue come from center which changes their debt servicing ability for the worse.<\/li>\n<\/ul>\n<p><strong>What are the recent issues?<\/strong><\/p>\n<ul>\n<li><strong>Revenue side<\/strong>:\n<ul>\n<li>In the first half of fiscal the center\u2019s net revenue (tax and non-tax) collection stood at 27.3% of budget for the full fiscal year compared to 41.6% of previous fiscal year.<\/li>\n<li>Revenue collections in the first half of the year were down to 32.5% as compared to an average 15% growth over the same period.<\/li>\n<\/ul>\n<\/li>\n<li><strong>State\u2019s fiscal issue:<\/strong>\n<ul>\n<li>Fiscal data for the year is available only for the eleven non special category states.<\/li>\n<li>Revenue of these states is down by 21.5%.<\/li>\n<li>Adding center\u2019s transfer to the states then the decline in revenue reduces to 16.5%.<\/li>\n<li>Shortfall in states\u2019 revenue is much steep than that of center.<\/li>\n<li>For the eleven states total expenditure and capital spending have contracted by 1.5% and 23.4 % respectively.<\/li>\n<li>Allocation for pension and subsidies down by 10% and 20%.<\/li>\n<li>Since health is State subject, state will have to shoulder major part of health expenditure burden on account of the pandemic.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Cutting capital expenditure:<\/strong>\n<ul>\n<li>Both center and state have cut their capital expenditure.<\/li>\n<li>This is worrying as states undertake more as they have more than 60% of the overall general government capital expenditure.<\/li>\n<li>For instance, in 2019-20, capital expenditure by states stood at rs 4.97 lakh crore down by 20%.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Low capacity utilization:<\/strong>\u00a0for instance, it was 71.9 % in the previous year which is down to 58.6 %.<\/li>\n<\/ul>\n<p><strong>What are the consequences?<\/strong><\/p>\n<ul>\n<li>Reduces Center\u2019s and states\u2019 ability to invest and lift the economy.<\/li>\n<li>Need of more borrowing.<\/li>\n<li>Centre\u2019s total expenditure has been declined by 0.6 % which led to 11.6% decline in capital expenditure with revenue expenditure by 1 %.<\/li>\n<li>To maintain states \u2018spending government has forced them to increase borrowing which has led to increase in market borrowing by 50%.<\/li>\n<li>Rising debt level of states. For instance, overall government general debt stood at nine year high.<\/li>\n<li>Centre\u2019s debt to GDP is declining.<\/li>\n<li>Ratio of interest payment to revenue receipts is also declining which raises question on sustainability of debt.<\/li>\n<li>The private sector will remain wary of investing as demand uncertainty continues.<br \/>\n<hr \/>\n<\/li>\n<\/ul>\n<blockquote class=\"wp-embedded-content\" data-secret=\"tuhrLxOGHf\"><p><a href=\"https:\/\/forumias.com\/blog\/cut-in-rate-on-small-saving-schemes-withdrawn-by-finance-minister\/\">Cut in rate on small saving schemes withdrawn by Finance Minister<\/a><\/p><\/blockquote>\n<p><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;Cut in rate on small saving schemes withdrawn by Finance Minister&#8221; &#8212; Free UPSC IAS Preparation For Aspirants\" src=\"https:\/\/forumias.com\/blog\/cut-in-rate-on-small-saving-schemes-withdrawn-by-finance-minister\/embed\/#?secret=99pK74pG9e#?secret=tuhrLxOGHf\" data-secret=\"tuhrLxOGHf\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Context: The pandemic has delivered a \u201cscissor cut\u201d to the government finances. What is the current scenario? Economic output and government revenues are shrinking. The government has to spend more to safeguard lives and livelihoods. Widening deficit. Most of state\u2019s revenue come from center which changes their debt servicing ability for the worse. What are&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/present-state-of-economy\/\">Continue reading <span class=\"screen-reader-text\">Present State of economy<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230],"tags":[1284,1530],"class_list":["post-71003","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","tag-eco_2","tag-gdp_national_income_updates","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":1700787054,"cached_date":1704945626},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/71003","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\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=71003"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/71003\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=71003"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=71003"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=71003"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}