{"id":15366,"date":"2021-05-24T00:00:00","date_gmt":"2021-05-24T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/24-05-2021\/impact-of-covid-19-on-government-finances\/"},"modified":"2021-05-24T00:00:00","modified_gmt":"2021-05-24T00:00:00","slug":"impact-of-covid-19-on-government-finances","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/24-05-2021\/impact-of-covid-19-on-government-finances","title":{"rendered":"Impact of Covid-19 on Government Finances"},"content":{"rendered":"<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The government released the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>First Advance Estimates<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (FAE) at the start of January 2021 and the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Second Advance Estimates<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (SAE) in February 2021, which showed the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>impact of Covid-19 on the finances of the Centre and the States in 2020<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Key Highlights<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>First Advance Estimates<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Gross Domestic Product<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (GDP) would <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>contract <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">by <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>7.7 per cent <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">in Fiscal Year (FY) 21.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Gross Value Added<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (GVA) would <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>contract <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">by <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>7.2 per cent<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">GVA captures the value added (in money terms) by economic agents in each sector of the economy.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The GDP is arrived at by taking the GVA number, adding all the taxes earned by the government and subtracting all the subsidies provided by the government.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>India\u2019s per capita GDP<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>per capita private consumption<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>level of investments<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> in the economy, all were<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> expected to fall<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> to levels similar to those of 2016-17 or earlier.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Second Advance Estimates<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Showed that the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>contraction in GDP would be 8 per cent<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> instead of 7.7 per cent.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">GVA would contract by only 6.5 per cent and the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> growth rate of GVA<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> was <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>expected to get better<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The change between FAE and SAE might be marginal but the turnaround in GVA suggested a recovery in the Indian economy.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Provisional Estimates<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Since February-end, India has been witnessing the second wave of Covid-19 and the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> impact on the economy <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">would be estimated in the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Provisional Estimates<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (PEs) for the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> full financial year 2020-21<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, to be<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> released by May-end<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The data would also <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>provide the new benchmark for assessing economic growth <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">for the current financial year (FY22).<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">India\u2019s GDP growth rate in the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>current financial year<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (2021-22 or FY22) is forecasted to be <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>9.7 per cent<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">According to an <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>International Monetary Fund<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (IMF) analysis, if one<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> presumes a contraction of 8 per cent in FY21<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> then a <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>GDP growth of 9.7 per cent in FY22<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> is just a statistical phenomenon.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/a9vPYriTX_ebld6NRU1DsJHA_uJO4cr9z5_AasqjGr0ueoGE8xY_gzfJnv-HKRyuOgdHggQnQwODe1dyfVn9k6QC58zzb2fVAKYJkSzulTWy59DJhVh6r3uzouL1YmeM9FoW2aQs\" style=\"height:316px; width:586px\" \/><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Impact on Centre\u2019s Finances<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Revenues<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, both from tax and non-tax sources, <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>fell sharply<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>government overshot its expenditure<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> as well.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">This resulted in the Union government\u2019s <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>revenue deficit<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (the difference between its revenue receipts and its revenue expenditure) as well as its<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> fiscal deficit<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (a measure of its overall borrowing) <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>rising sharply<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">In its original intent, the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Fiscal Responsibility and Budget Management <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">(FRBM)<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> Act, 2003<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">expected the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>revenue deficit to be zero<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>fiscal deficit <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">to be limited to <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>3 per cent<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">While the central government has been failing to meet either of these targets for over a decade yet, the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Covid disruption has meant that the government\u2019s fiscal deficit will remain out of shape<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> for a while.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align:center\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/1J-SBV8_Q9jjNVDk0MGMcjZmmz9jKBnNJzRMMEP8LVJ2kzgxqM_bh0nKD4yWs2eU3cw4q_8PrFs3h0cz9qsvxka2HlNOMLKoDSWjaOCcUGB47UV84rz4xdXDRreSEbwZbJDVh_iP\" style=\"height:332px; width:559px\" \/><\/span><\/span><\/span><\/p>\n<p>\u00a0<\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>61 per cent<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> of the rise in fiscal deficit was due to a fall in <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>revenue <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">and <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>39 per cent <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">was due to a rise in <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>expenditure<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The table shows that <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>all tax and non-tax revenues took the biggest hit except for Union Excise Duties<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (UEDs):<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align:center\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/C1QOYaV0LlixxiUwecT5xIRLCnR0z6KZzdNmKamaOyMvJJqEjVT1HloRFzZBlWLDtOV6KKqbQ9-S7_qpDOsVrqm_m9GCF0WTOIV1PMofDKKAOE5uk2Li_hDxnqB6CCJTDMfq7P6A\" style=\"height:389px; width:295px\" \/><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">However, the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>massive jump in UED collection did not benefit the states<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> since the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Union government collected it by increasing cesses and surcharges<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> on UED instead of raising the basic UED rate.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Cesses accounted for 65 per cent of all the UED collection in FY21, registering an annual growth of 187 per cent.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">In fact, if one removed the cesses and surcharges, the UED collections for the past financial year would actually fall by 20 per cent, instead of going up by 50 per cent.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> proceeds of cesses and surcharges are not shareable with states<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Impact on States\u2019 Finances<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">To analyse the situation for states, the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>monthly statements of accounts <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">(Monthly Key Indicators) data provided by the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Comptroller and Auditor General <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">(CAG) of India were used.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The data was taken<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> for 16 major Indian states<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (excluding Goa and Bihar) till December 2020, i.e., up to the third quarter (Q3) of 2020-21.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The main takeaway was that, on the aggregate, <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>states have contained their revenue as well as capital expenditures to cope up <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">with the revenue shock.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">However, the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>containment of expenditures was not sufficient<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> to compensate for the contraction in total receipts.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Consequently, in the first three quarters of FY21, these <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>states saw their revenue deficits exceed the budget target by almost 240 per cent<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and their <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>fiscal deficit <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">by over <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>40 per cent<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">State-level finances are <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>not as badly hit as the Centre<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and this has <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>happened despite the fall in Union taxes<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> resulting in <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>lower tax devolution to states <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">by 30 per cent.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Around <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>half of all state-level tax revenues come from<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> \u2018Own Tax Revenues\u2019, which include <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>taxes such as<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> state GST, state sales tax, state excise duties, stamps and registration fees, land revenues, etc.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The table shows <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>statewide variations<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, both in terms of revenues raised and expenditures made:<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/lg77bCWIBV_XfH8X7WPuHq-UKSdQUKJiRHyGC70NM5bCBVE5bC_Z3xRlrUmLPdP0iwcvaKWiVNnCEE-2Kbf3I3xuy_dDrGSuGCgy1xPahE8IbkitXVIG-tvWC1iDDY6eKC5AX97P\" style=\"height:305px; width:588px\" \/><\/span><\/span><\/span><\/p>\n<div>\n<table cellspacing=\"0\" style=\"border-collapse:collapse; border:none; table-layout:fixed; width:624px\">\n<tbody>\n<tr>\n<td style=\"background-color:#fff2cc; border-bottom:1px solid #000000; border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; vertical-align:top\">\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>International Monetary Fund<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It was established in <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>1944 <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">in the aftermath of the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Great Depression of the 1930s<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>IMF and the World Bank<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> are also known as the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Bretton Woods twins<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> because both were agreed to be set up at a conference in <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Bretton Woods in the US<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It is <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>governed by and accountable to the 190 countries<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> that make up its near-global membership.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>India <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">became a <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>member <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">in<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> December 1945<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Aim: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">To ensure the stability of the international monetary system (the system of exchange rates and international payments) which enables countries and their citizens) to transact with each other.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Its <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>mandate was updated in 2012<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> to include all macroeconomic and financial sector issues that bear on global stability.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Financing:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> The IMF&#8217;s resources mainly come from the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>money that countries pay as their capital subscription<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (quotas) when they<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> become members<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Each member of the IMF is assigned a quota, based broadly on its relative position in the world economy.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Countries can then borrow from this pool when they fall into financial difficulty.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Publications<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">World Economic Outlook<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Global Financial Stability Report<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Fiscal Monitor<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Global Policy Agenda<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align:center\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/7Ue4UcElmSYyNzooKbV0AYHrAiCN4o8IPc2dfIQ1ZOMWjZlcPUfG2_7bl46zkrc5lOsRbJa-zSdpjutyPTE6uU9Sbhbp-gFGGItSFasjm6vCIml4w5-TW6Wdx9Epo0WhQM3mpFpl\" style=\"height:216px; width:610px\" \/><\/span><\/span><\/span><\/p>\n<p style=\"text-align:center\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">(Image Courtesy: <\/span><\/span><\/span><a href=\"https:\/\/www.imf.org\/en\/About\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#1155cc\"><u>IMF<\/u><\/span><\/span><\/span><\/a><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">)<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Fiscal Responsibility and Budget Management Act, 2003<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It establishes<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> financial discipline<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> to reduce the fiscal deficit.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It was<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> introduced in 2000<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and was approved by the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Union Cabinet in 2003<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and became <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>effective from 5<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><sup>th<\/sup><\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> July 2004<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Aims<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">To introduce transparency in India&#8217;s fiscal management systems.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">To achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">To introduce more equitable distribution of India&#8217;s debt over the years.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Key Features<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It made it<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> mandatory for the government to place the following along with the Union Budget documents<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> in Parliament annually:<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Medium Term Fiscal Policy Statement<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Macroeconomic Framework Statement<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Fiscal Policy Strategy Statement<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It proposed that revenue deficit, fiscal deficit, tax revenue and the total outstanding liabilities be projected as a percentage of GDP in the medium-term fiscal policy statement.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Exemptions:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> On grounds of national security, calamity, etc, the set targets of fiscal deficits and revenue could be exceeded.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">In <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>2013<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, the government introduced a change and<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> introduced the concept of effective revenue deficit<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">This implies that effective revenue deficit would be equal to revenue deficit minus grants to states for the creation of capital assets.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">In <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>2016<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, a <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>committee under N K Singh<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> was set up to suggest changes to the Act and its<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> recommendations <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">are as follows<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Targets:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> The committee suggested using <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>debt as the primary target for fiscal policy<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and that the target must be achieved by 2023.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Fiscal Council:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> It proposed to create an<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> autonomous Fiscal Council <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">with a chairperson and two members appointed by the Centre (not employees of the government at the time of appointment)<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Deviations:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> The committee suggested that the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>grounds<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> for the government to deviate from the FRBM Act targets<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> should be clearly specified<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Borrowings:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> According to the suggestions of the committee, the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> government must not borrow from the RBI, except when<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The Centre has to meet a temporary shortfall in receipts.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">RBI subscribes to government securities to finance any deviations.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">RBI purchases government securities from the secondary market.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Comptroller and Auditor General<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The Constitution of India provides for an<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> independent office<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> of the Comptroller and Auditor General of India (CAG).<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">He\/she is the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> head of the Indian Audit and Accounts Department<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and is the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>guardian of the public purse<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>controls the entire financial system<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> of the country at both the levels, the Centre and the States.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It is his\/her <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>duty to uphold the Constitution of India<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and the l<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>aws of Parliament in the field of financial administration<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Evolution<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The idea of CAG <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>evolved in British India<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">. In <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>May 1858<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, for the first time, a separate department was set up with an Accountant General, who was responsible for accounting and auditing the financial transactions under the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>East India Company<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> (EIC).<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">In the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Montford Reforms of 1919<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, the Auditor General became <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>independent of the government<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Government of India Act 1935<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>strengthened the position<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> of the Auditor General by providing for Provincial Auditors General in a federal set-up.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Constitutional Provisions for CAG<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Article 148: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Appointment, oath and conditions of service.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Article 149: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Duties and powers.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Article 150:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> The accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the CAG, prescribe.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Article 151:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> Deals with the Audit Reports.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The reports of the CAG relating to the accounts of the Union shall be submitted to the president, who shall cause them to be laid before each House of Parliament.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Article 279: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Mentions that calculation of \u201cnet proceeds\u201d is ascertained and certified by the CAG, <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>whose certificate is final<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Third Schedule: Section IV <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">of the Third Schedule of the Constitution of India <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>prescribes the form of oath or affirmation<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> to be made by the Judges of the Supreme Court (SC) and the CAG at the time of assumption of office.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Source: <\/span><\/span><\/span><a href=\"https:\/\/indianexpress.com\/article\/explained\/explainspeaking-how-covid-19-impacted-central-and-state-government-finances-in-2020-7327525\/\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#1155cc\"><u>IE<\/u><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News The government released the First Advance Estimates (FAE) at the start of January 2021 and the Second Advance Estimates (SAE) in February 2021, which showed the impact of Covid-19 on the finances of the Centre and the States in 2020. Key Highlights First Advance Estimates The Gross Domestic Product (GDP) would contract by [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":15367,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[62,26,46,106,105],"class_list":["post-15366","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-growth-development","tag-gs-3","tag-indian-economy-related-issues","tag-mobilization-of-resources","tag-planning"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/5165114current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/15366","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=15366"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/15366\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/15367"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=15366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=15366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=15366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}