Understanding state finances are important because i to understand the Impact of rising market borro...........

Economic and Social Issues Nature of Indian economy

RBI released its annual study of state-level budgets entitled “State Finances: A Study of Budgets” which analyses the fiscal position of state governments. It is an annual publication that provides information, analysis and an assessment of the finances of state governments. The budget is also called Annual Financial Statement. Indian budget is presented every year by the Finance Minister in Parliament. Through this budget statement; the government displays its revenue and expenditure of the previous year and its budget estimates for the upcoming year.Sharp deterioration in state finances during the last decade - as evidenced by sharp increases in revenue, fiscal and primary deficits, increases in their indebtedness and contingent liabilities, and decline in capital and maintenance expenditures - has been a matter of serious concern to policy-makers. Low buoyancy of central transfers and spillover of central pay revisions have had the most adverse impact on state finances. However, the states' own fiscal performance has also seen sharp deterioration. On the transfer system, the scheme proposed by the ministry of finance attempts to link a portion of transfers to fiscal reforms. There are serious design issues in the scheme. It is not certain whether the scheme will be effective either. The paper details the areas of reform the states should focus on to impart efficiency and improve revenue productivity and prioritisation and compression of unproductive expenditures.

Understanding state finances are important because

i to understand the Impact of rising market borrowings

ii to understand the Impact of rising fiscal deficit & debt-to-GDP ratio

iii Employment

Select the correct answer using the code given below

i. and ii only

ii and iii only

i. and iii only

all of the above

none of these

छोटे Courses बड़े Results

Master Nature of Indian economy

Prepare through Micro-courses

Try Now

Explanation:

Understanding state finances are important because

•Impact of rising market borrowings: Since 2014-15, states have increasingly borrowed money from the market, which has reduced the availability of funds for businesses to invest. Additionally, this would raise the cost of credit for the private sector, as more number of debtors are now chasing the same amount of money.

•Impact of rising fiscal deficit & debt-to-GDP ratio: State government finances are important not only for India’s GDP growth and job creation but also for its macroeconomic stability.

Employment: States now spend one-and-a-half times more than the Union government and employ five times more people than the Centre. Not only do states have a greater role to play in determining India’s GDP than the Centre, they are also the bigger employment generators.