SHIKHAR MAINS 2022 - DAY 13 Model Answer English

Q1. गरीबी क्या है ? गरीबी रेखा के निर्धारण से संबन्धित विभिन्न समितियों  का उल्लेख कीजिये ?

What is poverty? Mention the various committees related to the determination of the poverty line?

Approach -

•      Define poverty and poverty line in introduction.

•      In the main part, give the recommendations of various committees in the context of poverty line in sequence.

•      At the end write the suggestive conclusion.

Answer –

           Poverty is a condition in which a person is unable to fulfil the minimum requirements required for his subsistence. That is, poverty refers to not being able to mobilize the minimum resources to meet the basic needs. The concept of poverty is related to economic development, per capita income, purchasing power and population. There are two types of poverty. First, absolute poverty and second, relative poverty. Poverty is measured to meet the objectives of assessing the level of national development, formulation and execution of developmental plans and identification of eligible beneficiaries. The concept of poverty line is introduced in the context of measurement of absolute poverty.

           Poverty line is defined as the level of income below which a person is not able to meet his material needs due to low income. The poverty line varies from country to country. The poverty line in India is estimated by NITI Aayog on the basis of NSSO data in terms of monthly consumption expenditure. This determination is made on the basis of the criteria suggested by the expert committee. So far, various expert committees have been constituted by the Planning Commission / NITI Aayog to recommend the criteria determining the poverty line in India. Following is a chronological description of these expert committees and the recommendations made by them-

•      The planning commission started setting a working group in 1962 by setting up a poverty line. It considered the per capita monthly consumption expenditure of Rs 20 as the poverty line based on prevailing prices.

•      YK Alagh Committee- This committee was constituted by the Planning Commission in 1979. Alagh committee had recommended fixation of poverty line on the basis of minimum nutritional requirement. The committee suggested different nutritional standards for urban and rural areas based on the urban and rural nutrition levels suggested by ICMR. According to the recommendations of the Alagh Committee, those consuming 2400 calories in rural areas and less than 2100 calories in urban areas were considered as BPL. The poverty line determined on the basis of calorie consumption was Rs 49 for rural areas and Rs 56.64 for urban areas per month.

•      Lakdawala Committee - In 1989, a working group was again constituted by the Planning Commission under the chairmanship of DT Lakdawala. The Lakdawala committee also considered the minimum nutritional requirement as the criterion for determining the poverty line as per the YK Alagh committee. This working group set a separate poverty line for each state. The Lakdawala committee made the price indices the basis for pricing. Calorie standards were kept the same but the prices ​​were changed. Now the poverty line was fixed at Rs 281 for urban areas and Rs 205 for rural areas.

•      Tendulkar Committee - In the year 2005, a new committee was constituted under the chairmanship of Prof. Suresh Tendulkar to make suggestions regarding the re-determination of poverty line by the Planning Commission. The Tendulkar Committee rejected the norm of minimum nutritional requirement and determined the poverty line on the basis of expenditure on essential commodities. The concept of poverty basket was introduced by Tendulkar Committee. The committee considered the minimum expenditure of Rs 27 per person per day in rural areas as the poverty line, while for urban areas it was Rs 33 per person per day.

•      Rangarajan Committee - The poverty line set by the Tendulkar Committee remained controversial due to various reasons. Therefore, a review committee was constituted by the Government of India under the chairmanship of C. Rangarajan to review the poverty estimation methods. The committee considered the minimum expenditure on selected essential commodities as the basis but increased the prices suggested by the Tendulkar Committee to Rs.32 for rural areas and Rs.47 for urban areas. Based on this, 30% of the population in India was considered poor in the year 2011-12.

•      Like other committees, the Rangarajan formula was also controversial. Therefore, in the year 2015, a 14-member task force was formed under the chairmanship of Arvind Panagariya to estimate the actual poverty line. However, the task force has advised NITI Aayog/Government to adopt the poverty line norms prescribed by Tendulkar Committee till the new poverty line is determined.

            It is clear from the above analysis that since the poverty line determination issue has wide political and fiscal implications. Therefore, the issue of determining the poverty line has been continuously disputed in India. Also, there is a lack of consensus regarding the poverty line. Therefore, to identify the actual poverty line, the Indian government should also focus on the study and research of the methods being adopted in other countries of the world.

 Q2. राजस्व घाटा और राजकोषीय घाटे मे अंतर को स्पष्ट करते हुए राजकोषीय घाटे को कम करने से संबन्धित उपायों की चर्चा कीजिये ?

Explain the difference between revenue deficit and fiscal deficit, discuss the measures to reduce fiscal deficit?

Approach -

•      Write about Revenue deficit and Fiscal deficit.

•      Write down the side effects arising out of Fiscal deficit.

•      Write conclusion giving the measures to reduce the Fiscal deficit.

Answer –

           Revenue deficit occurs when the total expenditure of the government exceeds its estimated income. That is, the difference between the revenue expenditure and revenue receipts of the government is called revenue deficit.

           Fiscal deficit presents a real picture of the economic condition of a country. It shows the entire liabilities of the government. In fact, fiscal deficit is the difference between the gross income and the gross expenditure of the government.

Side effects of fiscal deficit:

•      Debt trap situation may arise due to high public debt.

•      The problem of inflation may arise due to high public expenditure.

•      Crowding out effect may occur. This has the potential to discourage investment.

•      To meet the public debts, the government increases the rate of tax, due to which the tax falls on the public. This has the potential to increase inflation.

Measures to reduce fiscal deficit:

There should be proper management of public debt and expenditure by the government.

•      The subsidies provided to the public should be rationalized.

•      Efforts should be made to rationalize tax management.

•      Special attention should be given to the manufacturing sector.

•      Efficient management of human resources.

•      Promotion of capital investment.

         Disinvestment of sick public sector units so as to reduce the financial liability on the government. Fiscal deficit is targeted at 6.4% of GDP in Budget 2022. This is in line with the fiscal consolidation announced last year, which aims to bring down the fiscal deficit to below 4.5% by 2025-26.