Author name: Shabbu IAS

The Economic Survey 2024 On July 22, 2024, Finance Minister Nirmala Sitharaman presented the Economic Survey 2024, offering a detailed examination of India’s economic progress in the previous year and forecasts for the future. The survey emphasizes various important factors. For the third consecutive year, the Indian economy has maintained a growth rate of over 7%. This growth has been fueled by stable consumption and increasing investment demand. Inflation has been effectively managed through strategic administrative and monetary policies, resulting in a decrease in retail inflation to 5.4% in FY24, the lowest since the pandemic. The current account deficit has also improved, dropping to 0.7% of GDP from 2.0% in FY23. India’s forex reserves are sufficient to cover more than ten months of projected imports, and the banking sector has shown strong performance with double-digit credit growth and low NPAs. However, net FDI inflows declined to $26.5 billion in FY24 from $42 billion in FY23. The agriculture sector has grown at an annual rate of 4.18% over the past five years, the industry at 9.5% in FY24, and the services sector contributed 55% to the economy in FY24. Looking ahead, inflation is projected to decline to 4.5% in FY25 and 4.1% in FY26, assuming normal monsoon conditions and no major external shocks. The focus will be on bottom-up reforms, job and skill creation, MSME development, green transition, and addressing inequality. Visit Official Site-click here Fore More Click Here Also Read The history of the Indian budget What Is Foot Root Disease ? UPSC What Is Green Taxonomy ? UPSC Who Is Hello Kitty ? Who Is Dafne Keen 

The history of the Indian budget The history of the Indian budget is rich and reflective of the country’s economic evolution and political changes. Here are some key highlights: Pre-Independence The introduction of the concept of a budget in India by James Wilson of the East India Company on April 7, 1860, marked the beginning of formal financial planning in the country. Post Independence The first budget of independent India was presented on November 26, 1947, by Finance Minister R. K. Shanmukham Chetty. In 1955, the budget began to be printed in both Hindi and English for wider accessibility. The tradition of presenting the budget at 5 pm on the last working day of February continued until 1999, when Finance Minister Yashwant Sinha moved it to 11 am. In 2017, Finance Minister Arun Jaitley moved the budget presentation date to February 1 to allow more time for implementation before the new financial year starts. Notable Budget 1973-74 Black Budget: Y. B. Chavan presented a budget with a fiscal deficit of Rs 550 crore. 1986 Carrot and Stick Budget: V. P. Singh introduced the MODVAT scheme, signaling the end of the license raj. 1991 Epochal Budget: Manmohan Singh’s budget kickstarted economic liberalization by reducing customs duties and encouraging foreign investment. 1997-98 Dream Budget: P. Chidambaram aimed at tax reforms and tackling black money. 2000 Millennium Budget: Yashwant Sinha focused on the IT sector and tax reforms. 2021 Once-in-a-Century Budget: Nirmala Sitharaman prioritized post-pandemic recovery, infrastructure development, and healthcare. Significant Record Nirmala Sitharaman delivered the longest budget speech on record in 2020, lasting 2 hours and 42 minutes. Morarji Desai holds the record for presenting the most budgets with 10, followed by P. Chidambaram with 9, and Pranab Mukherjee with 8. The budget for 2021-22 was the first paperless budget in response to the COVID-19 pandemic. In recent updates, the 2021 budget has prioritized a digital census, the introduction of a vehicle scrapping policy, and substantial investments in infrastructure and healthcare. Additionally, in 2017, the railway budget was integrated with the general budget after 92 years of being presented independently. Key Highlights Colonial Era The groundwork for structured financial planning in colonial India was laid by James Wilson’s Budget in 1860, the first budget presented by the East India Company . Post-Independence Budgets Setting the tone for economic policies in the newly independent nation, R. K. Shanmukham Chetty presented India’s first budget in 1947 Landmark Changes Starting in 2017, the budget presentation time and date were shifted from the colonial practice of 5 pm on the last working day of February to 11 am on February 1 Iconic Budgets During Indira Gandhi’s tenure, the Black Budget of 1973-74, known for its high fiscal deficit, was presented by Y. B. Chavan. Introduced during the Carrot and Stick Budget of 1986, MODVAT and steps against tax evasion marked a move towards dismantling the license raj . Considered a turning point in India’s economic history, the Epochal Budget of 1991 under Manmohan Singh introduced economic liberalization and ended the license raj . Focused on tax reforms and reducing black money using the Laffer Curve principle, P. Chidambaram’s Dream Budget of 1997-98 was notable. Yashwant Sinha’s Millennium Budget of 2000 focused on the IT sector and introduced significant tax reforms. Known for its several rolled-back proposals, the Rollback Budget of 2002-03 was presented by Yashwant Sinha during the NDA government headed by Atal Bihari Vajpayee . Nirmala Sitharaman’s Once-in-a-Century Budget of 2021 aimed at post-pandemic recovery with a focus on infrastructure and healthcare Budget Presentation and Records To ensure wider accessibility, the budget has been printed in both Hindi and English since 1955. Nirmala Sitharaman became the second woman to present the budget in 2019, following Indira Gandhi who presented the 1970-71 budget. Due to the COVID-19 pandemic, the 2021-22 budget was the first paperless budget. Recent Highlights Significant allocations were made for infrastructure, healthcare, and clean air initiatives in the 2021 budget. The introduction of the vehicle scrapping policy and the Production Linked Incentive (PLI) Scheme were notable features aimed at boosting the manufacturing sector . Economic Reforms and Impact Credited with opening up the Indian economy, reducing import tariffs, and encouraging foreign investment, Manmohan Singh’s 1991 budget played a key role in economic liberalization. P. Chidambaram’s budget in 1997-98 is remembered for its significant tax reforms, including reducing income tax rates and simplifying the tax structure. Also Read What Is Foot Root Disease ? UPSC What Is Green Taxonomy ? UPSC Who Is Hello Kitty ? Who Is Dafne Keen ? What Is CrowdStrike ?

Fiscal Policy And Monetary Policy Governments and central banks utilize fiscal policy and monetary policy as the main tools to impact economic activity and attain macroeconomic goals. Here is a summary of both: Fiscal Policy Definition-Fiscal policy is the utilization of government spending and taxation to impact the economy, carried out by governments through the budgeting process. Goals: The primary goals of fiscal policy are as follows: 1. Promoting Economic Growth: Governments can enhance economic activity by increasing investments in infrastructure, education, healthcare, etc., to stimulate demand. 2. Managing Inflation: Fiscal policy can help control inflation by adjusting taxes and spending to regulate aggregate demand. 3. Addressing Unemployment: During economic downturns, fiscal policy aims to create job opportunities and lower unemployment rates by increasing government spending. 4. Income Redistribution: Income inequality can be reduced by adjusting taxes and welfare programs to redistribute income. Fiscal policy tools primarily include government spending and taxation. Government spending involves direct expenditures on goods, services, infrastructure projects, and social programs. Taxation involves adjustments in tax rates (income tax, corporate tax, sales tax, etc.) to influence disposable income and consumption. The implementation of fiscal policy is carried out by legislative bodies such as Parliament or Congress through the annual budget process. This involves the approval and allocation of funds for government programs and initiatives. Example during economic downturns, governments may enact expansionary fiscal policies by boosting public spending on infrastructure projects and offering tax cuts to encourage consumer spending and investment. Monetary Policy Monetary policy involves the measures implemented by a central bank, such as the Federal Reserve in the US or the Reserve Bank of India, to regulate interest rates, money supply, and credit conditions within the economy. Goals: The main goals of monetary policy are: 1. Inflation Control: Central banks use monetary policy tools to regulate inflation rates by adjusting interest rates and impacting borrowing costs. 2. Economic Growth Promotion: By controlling interest rates, central banks can promote borrowing, investment, and consumption, thus stimulating economic activity. 3. Price Stability Maintenance: Stable prices ensure that the value of money remains relatively constant over time, promoting economic stability. 4. Exchange Rate Management: In certain situations, central banks may intervene in foreign exchange markets to stabilize exchange rates and bolster export competitiveness. Monetary Policy Tools: The primary tools of monetary policy consist of: 1. Interest Rates: Central banks adjust short-term interest rates (such as the federal funds rate in the US) to impact borrowing expenses for businesses and consumers. 2. Open Market Operations: Central banks purchase or sell government securities in the open market to regulate the money supply and influence interest rates. 3. Reserve Requirements: Central banks establish the minimum reserves that commercial banks must maintain, which impacts their capacity to lend and generate money. Implementation -The central bank’s monetary policy committee or board of governors makes decisions regarding monetary policy implementation. These decisions are informed by economic indicators like inflation rates, GDP growth, employment levels, and other factors impacting the economy. Example- During economic slowdowns, central banks may use accommodative monetary policies by reducing interest rates and adding liquidity to financial markets in order to encourage lending and investment. To sum up, fiscal policy is centered on government spending and taxation to directly impact economic activity, while monetary policy involves central bank measures to control interest rates and money supply in order to indirectly achieve economic goals. Both policies are essential in shaping economic results, controlling inflation, and fostering sustainable economic growth. Also Read What is GDP and why is it important? UPSC Nelson Mandela biography 2024 What is constitutionalism UPSC What Is Imported Inflation UPSC Global Alliance for Incinerator Alternatives UPSC

What is GDP and why is it important?   GDP, also known as Gross Domestic Product, is a crucial economic measure that signifies the overall monetary worth of all completed goods and services generated within a country’s boundaries during a designated time frame, typically on an annual or quarterly basis. It serves as a fundamental gauge of a nation’s economic well-being and productivity. This is why GDP holds significant importance. Economic Performance: GDP is a key indicator used to evaluate a country’s economic performance, providing information on the size and growth rate of the economy. An increase in GDP signifies economic growth, while a decrease indicates economic contraction. Standard of Living: GDP per capita, calculated by dividing the total GDP by the population, is often used as a measure of the standard of living in a country. A higher GDP per capita is associated with higher income levels, better infrastructure, and access to goods and services, reflecting a higher standard of living for the population. Policy Making: Governments and policymakers utilize GDP data to develop economic policies and make informed decisions. For instance, if GDP growth is slowing, policymakers may implement stimulus measures to boost economic activity. Conversely, if GDP growth is too rapid, measures may be taken to prevent overheating and inflation. Comparative Analysis: GDP enables comparisons between different countries or regions, aiding economists and policymakers in understanding relative economic performance, identifying trends, and analyzing disparities in economic development. Investment Decisions: Businesses and investors rely on GDP data to evaluate market opportunities, make investment decisions, and allocate resources. Higher GDP growth rates often indicate a growing market with potential for increased demand and profitability. Employment Trends: GDP growth is closely tied to employment trends, as businesses tend to hire more workers during economic expansion to meet rising demand. Therefore, GDP data offers insights into labor market conditions and unemployment rates. Monitoring Economic Stability: GDP is crucial for monitoring economic stability and resilience. Declines in GDP during economic downturns or recessions can indicate economic distress, prompting interventions to stabilize the economy and lessen negative impacts on households and businesses. Illustrative Example   Using India’s GDP as an example, we can demonstrate its significance and consequences. According to the most recent data, India’s GDP for the fiscal year 2021-2022 is approximately $3 trillion USD. This GDP figure can be interpreted in different contexts. Economic Performance: India’s GDP growth rate is a measure of how quickly the economy is growing. For example, if India’s GDP increased by 7% in a year, it means that the economy expanded by 7% in terms of money, showing increased production and economic activity in sectors like agriculture, manufacturing, and services. Standard of Living: India’s GDP per capita was around $2,300 USD during the same period, giving an average income estimate per person in the country. While GDP per capita is important for measuring standard of living, it doesn’t fully capture income distribution and disparities among the population. Policy Making: Indian policymakers use GDP data to create strategies and policies to sustain economic growth, reduce poverty, and improve infrastructure. For instance, if GDP growth slows down, policymakers might introduce fiscal stimulus measures to boost consumption and investment. Comparative Analysis: Comparing India’s GDP with other countries helps economists evaluate relative economic performance and development. India is often compared to other emerging economies like China, Brazil, and South Africa to understand regional economic dynamics and growth potential. Investment Decisions: Businesses and investors analyze India’s GDP growth rate and economic outlook to make investment decisions. Higher GDP growth rates indicate opportunities for businesses to expand and take advantage of increasing consumer demand. Employment Trends: India’s GDP growth is closely tied to employment trends. A strong GDP growth rate usually leads to job creation across sectors, resulting in higher employment levels and lower unemployment rates. Economic Stability: Changes in India’s GDP growth rate can indicate economic stability or instability. High GDP growth rates generally signal a stable economy, while a slowdown in GDP growth may raise concerns about economic health and require policy interventions. Fore |More Visit Govt.Website Also Read- Nelson Mandela biography 2024 What is constitutionalism UPSC What Is Imported Inflation UPSC Global Alliance for Incinerator Alternatives UPSC Rashtriya Arogya Nidhi Scheme UPSC 2024