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Q.3 How does freebie culture harm the financial health of the states? Analyse the effectiveness of the FRBM Act in dealing with the freebie culture and suggest a way forward. (10 Marks)

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Mentor’s Comments-

  • https://www.thehindu.com/opinion/lead/states-freebies-and-the-costs-of-fiscal-profligacy/article65573164.ece
  • In the intro, mention the increasing tendency of the political parties to promise freebies.
  • In the body, mention the purpose of freebies and cases in which government it is necessary. In the next part, mention how states resort to off-budget borrowing to finance these freebies while conforming to the FRBM Act. In the next part suggest an amendment to the FRBM Act for more complete disclosure, imposing condition on the wayward states, the use of the financial emergency provision of the constitution.
  • Conclude by mentioning the need for fiscal discipline in the states.

Comments

4 responses to “Q.3 How does freebie culture harm the financial health of the states? Analyse the effectiveness of the FRBM Act in dealing with the freebie culture and suggest a way forward. (10 Marks)”

  1. chandan mahabaliah Avatar
    chandan mahabaliah

    Payment Id: pay_Jleaaqb12Iv40R

    1. Staff @CD Avatar
      Staff @CD

      Chandan

      First part of your answer is decent. But improvements could be made in 2nd part.
      Intro is fine, other than votebank politics you could also mention some other reasons for freebies such as pandemic, transfer payments to vulnerable sections etc
      Consequences mentioned are fine, can make it a bit concise.
      In effectiveness, mention that much of the borrowing that funds these freebies happens off budget, beyond the pale of FRBM tracking. The States borrow on the books of their public enterprises, by pledging future revenues of the State as guarantee. Effectively, the burden of debt is on the State exchequer, although well concealed. This is the main point which shows ineffectiveness of FRBM Act, other points can be cut short.
      Also, a proper way forward needs to be mentioned- amendment to the FRBM Act for more complete disclosure, imposing condition on the wayward states by the centre, the use of the financial emergency provision of the constitution.

      Keep practicing. Go through the article tagged. 🙂

      3.5/10

  2. believing is seeing Avatar
    believing is seeing

    JmQPOijgofaERD

    1. Staff @CD Avatar
      Staff @CD

      Hello

      Introduction is fine, other than populist measures you could also mention some other reasons for freebies such as pandemic, transfer payments to vulnerable sections etc
      Next part is fine, you could mention the debt to GSDP ration in the beginning to show rising debt profile.
      In effectiveness, you have talked in a very concise manner.. As this is specifically asked, the modus operandi could be explained in 2 lines- Much of the borrowing that funds these freebies happens off budget, beyond the pale of FRBM tracking. The States borrow on the books of their public enterprises, by pledging future revenues of the State as guarantee. Effectively, the burden of debt is on the State exchequer, although well concealed.
      A way forward needs to be mentioned as this is again specifically asked, you could keep it brief, mention amendment to the FRBM Act for more complete disclosure, imposing condition on the wayward states by centre, the use of the financial emergency provision of the constitution.
      Conclusion is fine.
      Keep writing. 🙂

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