Question 2GS3GS3

The Reserve Bank of India's surplus transfers offer the government much-needed fiscal space, yet they are not without challenges. Critically examine the implications of the RBI's surplus transfers to the government. (Answer in 150 words)

Main Body

RBI transfers surplus income to govt. 2024 RBI provided record high transfer. Positive implications (1) Access to funds for govt to invest in infrastructure EG Capex = 3.4% of GDP (increased ISDA over 5 years) (2) Enables fiscal consolidation by govt EG Fiscal: 9.4.1 → 4.1.1, deficit 2010 → 2024 (3) Reduces govt reliance on debt & reduces interest payments (20.1% budgetary expenditure) (4) Enables expansion of social services expenditure EG (5.1. CAGR over last 5 years Negative implications (1) May cause wasteful spending by govt (Heller committee) EG Subsidies = 6% of govt expenditure (2) May create reliance on future transfers (3) Leads to freebies & wasteful elected promises (4) Not a stable source of income → may fluctuate (5) May lead to fiscal indiscipline While useful, govt should avoid wasteful spending promoting fiscal prudence as per FRBM Act 2003

— Aryan Yadav · AIR 31

141 words1 paragraphs

Conclusion

While useful, govt should avoid wasteful spending promoting fiscal prudence as per FRBM Act 2003

15 words

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Topper

Aryan Yadav

AIR 312025

Subject & Paper

GS3GS3

Topic

Economic Development

Government Budgeting

RBI Surplus Transfers and Fiscal Implications

Writing Stats

156

Total words

Paragraphs

critical and analytical

Tone

Linked PYQ

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